tv Squawk on the Street CNBC September 19, 2013 9:00am-12:01pm EDT
one thing that is different, every investor that you talk to, five, ten years ago, it's all about who are the targets. not anymore. now it's about who are the right acquirers and you see it in their stocks. >> thanks for doing this for two hours. >> my pleasure. >> congratulations again. >> we appreciate all your support. >> be sure to join us tomorrow. "squawk on the street" begins now. >> good morning. i'm carl quintanilla with david faber and jim cramer at the new york stock exchange. kayla? >> carl, we're just getting word that cross border regulators are levying $920 million in fines for jpmorgan for faulty oversight on the london whale oversight case. the federal reserve will get a $200 million fine, the office of the controller of the currency
will get $300 million from jpmorgan and the remaining will be split between the securities and exchange commission and the uk's conduct authority. we do not know whether jpmorgan has admitted wrong doing. the firm has said there were errors in its oversight and loopholes to allow that trade to happen and get as big as it did and to cause the steepness in losses that it did. but we haven't seen a formal admission of guilt to a regulator. that is expected, if it does happen, to come in the release from the securities and exchange commission, which we have not seen hit the wires yet. but this is a coordinated settlement with all of those four regulators, $920 million in fines. there are a lot of allegations outstanding at the department of justice and cfdc and reported criminal investigations ongoing as well. certainly this is a major
milestone for jpmorgan in set e settling these issues but there's a long way to go. >> kayla tausche, thank you very much. kayla mentions the number of agencies that this is all sort of commingling, the acc, the fcc, the occ in the u.k. >> they're just in the cross hairs. it's all for things that have already happening. it's not continuing. this is their time to get it. >> you lose $6 billion but the taxpayers have nothing to worry about. the institution pays -- the shareholders pay for a certain amount of time watching the stock go down and then you have to pay huge fines. if you lost $6 billion and went out of business, there weren't be any fines. >> and the shareholders pay. it's obvious this is an ongoing thing. jpmorgan is really -- a lot of people felt the regulators gave the banks too much of a pass. how do you show that you didn't? well, you come after jamie dimon
and jpmorgan. terrific. if i were a regulator i would say, jamie, give me $500 million. the osa, they could use some funding. >> at one point the number of agencies looking into this was up to eight, right? so this cuts that in half. is that not progress or -- >> well, i think that there's still some more to come. >> sure. >> the company is very silent, which is probably what i would do. i don't know. i've never been in a position where i write checks for $500 million. where does that money go? they say it goes somewhere. what does it do? >>goes to the treasury. >> pays down the debt? >> does it go to enforcement? >> i don't believe the penalties go to the enforcement. >> you're saying jpmorgan is one of the reasons we can have an affordable care act. >> we can push out the debt
ceiling a few more days. >> he's preventing a shutdown. >> fannie and freddie are the main reasons. >> it's about patriotism. he's preventing a shutdown. nonessential services will be paid because of jamie dimon and the shareholders. >> that's a silver lining -- >> i wish andy the best of luck. i still like him. >> kayla tausche has a little bit more. >> just as i was on the air before, we did get the release from the securities and exchange commission saying that jpmorgan has agreed to settle the charges by paying a $200 million penalty, admitting the facts underlying the s.e.c.'s charges and also acknowledging publicly that it violating federal securities laws. we knownd mary jo white's regime at the s.e.c. there has been a change of tack that firms can not settle without admitting wrong doing. the company has acknowledged there were gaps in oversight and they should have had more control over the issue from the get-go. this is one of the most high
profile cases where the firm is admitting wrong doing. another point that jim brought up which is where the money goes. if the s.e.c. believe there is is a tangible pool of victims, they will put some of these proceeds in a fair fund and it will go back to that group. when you pay something to the department of justice or to the treasury or a lot of these other government agencies, it does just go to treasury. it goes to the same place that your tax revenue goes to. a all gets pooled and in all likelihood it could be used for deficit reduction. >> in terms of the other matters yet to be resolved, would you argue the cftc is next to be in line? we keep hearing about back-and-forth negotiations. >> there are negotiations going on there. within one of the things they're report reportedly investigating is whether jpmorgan manipulated the
trading market. there's been a lot of talk about how could you spot the trade and bet against it because there was such dislocation in the pricing that you knew that this was going on, you knew that jpmorgan was the so-called london whale that was moving this market. but you have to have intent to actually figure that something criminal was going on and to claim manipulation. so i don't know if the cftc has information. whether that's enough to prove that jpmorgan manipulated the credit markets, we'll have to see. >> kayla tausche, thank you. >> futures on the rise. record highs for the dow, the s&p, the russell and the transports of course after the fed surprised -- some say shocked wall street by not scaling back its stimulus program, gold up $60, the yie
10-year yield up 2.7. >> they had telegraph tapering, they could have started the process, get us off the dope. it wouldn't have cost them anything because it was in the market and to me they blew it. >> guys, stan said my concerns with qe as a citizen. as a money manager, it's great. >> as a citizen, should he not care about the fact at that the government is going to cease, just like it did in december of 1995, january of 1996? dramatic decline in gdp during those periods, dramatic decline -- >> a shutdown. >> a shutdown you gave at 60% yesterday, moved up to 80? >> well, bernanke. >> i don't think he's having conversation -- >> why not? he knows -- he's just not acting -- the market's not acting on it but bernanke i think showed some foresight. can you imagine four weeks from
now if it turns out he tapered and people say what an idiot, didn't he see this coming? what kind of fed chief is he? >> if congressional discord is the bar you have to hop over in order to taper, we're never going to taper. >> there was one of the greatest articles in the "new york times." if you read the article, which is like on page a-12, you realize wait a second, look at the "new york times." the lynch story is the fed is still going to buy bonds. on twitter, this was a mean whamma-jamma up side slam for people who were short the bonds, which i guess most hedge funds were because that was a once in a lifetime move. >> whamma-jamma move? >> yeah, whamma-jamma. >> they can flip the bonds. >> 30 basis points.
>> that's a huge home run. >> move of a lifetime. >> and people don't talk about it enough. if you were long bonds going into this week, you're done. your year is made, your decade's made. >> kelly, jim says he showed foresight, others say he's lost his credibility. >> what's important is what jim just said about this raising the odds of a government shutdown. the fed yesterday, did it trade instability now for instability down the road? followed by stocks hitting fresh all-time highs on thursday as the fed pursues this policy. if you're worried about the politics of this. if you're the president and you're worried about the wealth gap and you doesnn't want to preside over all of this, does this raise because of how well the stock market is doing that
they push the shutdown to the brink or does it keep in play the idea of going to someone who is not necessarily as bernanke-like as you would think? and not just yellen in terms of running the fed but a lot of other positions that are open as well. >> what about a bernanke-like person like bernanke? >> steve asked a great question yesterday and he punted. i'm not answering that question. >> if the president didn't get his guy so we'll just stick with the guy. >> if i read one more article that says yellen got the job, i mean -- >> everybody says it's going to be sunday night. >> she does give a speech in new york. wait for them in her terms to confirm her dovishness or not. >> bernanke sees the housing
market tailed off dramatically, retail tailed dramatically. i love the fact that everyone gripes immediately. oh, emerging markets. i don't care about emerging markets. what about americans? shoot, the indonesia is in trouble. we live here! >> we do live here but there's been questions around the world about whether or not the fed has to take into account its ramifications more broadly. a lot of americans pooled into the emerging markets because they were chasing the return and liked the story and the manager told them to and now they're getting carried out. >> he's worried about the pharmacists in dylan, south carolina. he's a true america. turkey should be worrying about turkey. suddenly he has to worry about turkey? >> how much can the wealth effect bail out the rest of the u.s. economy? what the fed is doing here is hoping the wealth that's been created so far through the housing market and through the stock market will eventually either trickle down or start
some broader cycle that brings people back into the labor market but the fed's own research has been questioning how much of a health -- >> what's congress doing? what's the president doing? >> they're doing nothing. that's the point. >> there's a report out this morning entitled "get to work mr. schumer" because that's where onus really is now, right? >> the fed was the only one doing anything. everyone else is cutting back, the democrats are cutting back. this is not an eisenhower administration where they set up the interstate highway system. in '37 we had a terrible recession. bernanke, that's what he's about. he's a student of history. he is. he's a smart guy. >> there are many who say they love gridlock in washington, d.c., but many would also counter the inability to get an immigration bill, to get anything that could codify
certain policies that would help chi economic growth in this country -- >> i would love to hear from bill clinton. he was saying the shutdown would be terrible. >> i think he's going to be on letter man. >> letterman going to have bernanke? >> no. i think fallon's got bernanke. >> stewart's got bernanke. >> what a get! >> there is one final interesting point about all this because tomorrow we're going to get this vote on whether to defund obama care in the house. what bernanke did yesterday was effectively tie -- say a vote against qe -- if you're not happy with what the fed is doing right here, then you want to keep the government running. if keeping the government running means keeping obama care funded, he has now just tied everything. try grappling with that if you're a member of congress right now. >> they gave you a little gift
here. we'll be talking about that for days. is that a positive conversation? >> no, it's not at all. >> how many jobs are created by that? >> druckenmiller would tell you he's as worried about that as anything. >> teper's statement this morning is the fed is leaning heavy. >> if you work at united technologies, this is a great time, 3m. they're having a great quarter because asia has come back. if you're a local guy, shopkeeper, retailer, it's not a great time. what manny chirico said, the last ten days have been horrible. last night on "mad money," they said we have money, we're okay. >> that goes back to druckenmiller, why not choose now to taper. there's still a problem. >> my metaphor is the teacher in high school who extends the
essay deadline after half the class pulled an all-nighter because the market was ready for it. >> some guys are short -- oh, wow. holy cow, their year is lost and the people who bought it, their decade was made yesterday. it was 20 basis points. >> their decade? >> when was the last time we had a 20 basis-point move? >> they're getting more common. i bet you could go back this year and find another 20 basis point move. >> on the long side. >> on the long side. i will find it. it has been a while. >> a lot of movers to get to this morning, including oracle and disney. we'll see what cramer has to say about that. >> and days after announcing a div hike, microsoft, that meeting with analysts is today. the steve ballmer era starts to wind down. >> and futures a little more positive, best day since july 11th. back in a moment. has it's ups and downs.
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of the pixar movie "the good dinosaur" until 2016. that means no pixar movies will be released next year. first time that's happened since 2005. and "grand theft auto 5" generated a record number $800 million in first day sales. >> you have to put that number in context. that's 60% more than the "call of duty black ops 2," which was the largest. 60% above the largest. the last harry potter movie, $483 million day one. this is the largest single entertainment title daily take of all time in history of man. >> are there any parents left? i'd never let my kids have this. this is unbelievable. it's a huge number. >> buy game stock. >> it's not even taking into account -- and the model is
changing to a certain extent. there are a lot of add-ones to this game. you're going to measure by average revenue per user, because the kids are typically the ones who buy them, buy additions to them when the new one comes out. we haven't seen a new one in i think five years. >> it is great looking stuff. this is great for x-box and it is good for game stop. >> we'll see how take two does. this news was out with about an hour to go in trading yesterday. and the market did not react. >> they weren't focused on "grand theft auto" yesterday afternoon. >> it was the data release bad news as opposed to good news. >> if you looked at the number for grand theft, it's incredible how robust they are. we're still not going to take it. >> how about the disney
downgrade? >> take the other side. it's now about multiple expansion. >> end of an investment cycle. >> that's been the story for five year. bob iger has a series of movies rolling out every quarter. i saw one was pushed back, oh, wow. it's a staggered product launch as if it were procter & gamble during the days of yore and he's got it all figured out and these analyst who is have run big entertainment companies that are billions of dollars, not, they are constantly small minded about what igar has been able to do. i think it's because igor carries himself -- he's not going to tell you what he's going to do. he comes to your green room with no one. he has no entourage. he has no posse. who was the one guy that steve jobs respected? >> mr. iger. >> when we come back, we'll have cramer's mad dash. one more look at futures as we
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>> we have about five minutes from the opening bell. let's get a little "mad dash" in bio marin shares. >> here's the problem. this guy comes on a monday, early this week, and i wake up and the stock's suddenly up six, david, because of rumors that a company that doesn't need to raise money is going to make a bid. what is that? >> i can't really give you any confirmation whatsoever that roche is raising money to potentially make a bid for bio marin. they've been selling stock, they're not aware about it if it's coming. they do have about $24 billion in debt but they're a $2 billion market cap company. they don't need to go out and raise $10 billion. they can do whatever they want very quickly. it's unclear why we get stories about roach raising money when
they're the last company that needs to raise money to do anything, unless they're going to buy out verizon. >> this stock was here and it came up here. there might be guys that are long that want to get out. i do believe this is the floated rumors so someone can get out of biomarin. >> and roche, a 30% voting stake in roche. we'll talk about that coming up soon. >> thank you. >> the s&p coming off of record breaking session. let's see if we can get more market history made right here on "squawk on the street." ♪
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hindenberg. go to lake hurst, new jersey, we're done with the hindenberg omen. this is a -- this market broke out yesterday and i don't want to go into the shutdown with a head of steam but, wow, we had everything. housing stocks, housing related stocks, home depot finally down to where it was when they reported that great number. nobody liked it, getting there. >> there is the opening bell. ellington residential mortgage doing the honor, a reit. over at the nasdaq, taste of france, showcasing french innovation and culture in new york city september 28th and 29th. >> my executive producer got some of that boulange and didn't like it. she said that the muffin made her finger greasy and then she couldn't use her iphone.
>> you have downloaded ios 7? >> no, i'm going to buy one this weekend. >> you have? >> i downloaded it. have i have to say i am impressed. there's been coverage of people having difficulty get to the download. tim cook offn of cover of "business week," "what us, worry?" >> i think he's moved the needle. i would think about buying ups off the hand sales. fedex yesterday, goldman sachs downgrades it today because they're grouchy. disney guys grouchy. why are they so grouchy? why can't they be a little more upbeat?
>> disney did move up a great deal. if you're trying to stick to some sort of price discipline. >> price discipline? what is the point of that? why do you always let the facts get in the way of the story? is that something that just happened now? >> i can't help it. it's all the years of reputation. >> it's annoying. there are a lot of purists who do not want to look at it. it's an up market. maybe it shouldn't be and i fear the shutdown but wow. >> jpmorgan's statement is out on the settlement. jamie dimon says, quote, we have accepted responsibility and acknowledged our mistakes from the start. we have learned from them and worked to fix them. we will continue to strive towards being the best bank across all measures, not only by our shareholders and customers burr also our regulators. >> the bank when it comes to paying fine, i think jpmorgan
doesn't get hit -- >> did you just say the best bank when it comes to paying fine? >> no one pays fines like they do. >> they're setting the standards, too. >> they're the benchmark of good fining. >> i apologize to the purists and i'm going to spew green vomit at that camera if someone doesn't stop criticizing me on twitter. >> the stock was done a buck in the after market. a lot of people are very worried that the cloud is a headwind for them, not a tailwind. the conference call, they call a big cloud game. in the end you want cloud, sa s salesforce.com. >> you mentioned some of those downgrades.
conagra had been downgraded in the past few days. that looked kind of smart today, did it not? >> there was a downgrade general mills. that was a grumpy downgrade by wells. killing the stock. that was a bond market equivalent. >> that's stiritz who sold it to him. >> he was distributing herb herbalife. >> since bill stiritz got into it, it's sold a lot. >> the man knows how to make money. >> he has been a money maker from the old -- there are very few investors as good as steeritz. the money manager at bernstein
said do whatever steeritz does. that's what people have been doing in herbalife. >> you talked about not going into the shutdown with a head of steam. would you argue today is a day to buy anything at all is. >> no. it's not a day to buy anything. travel stocks during 1995, 1996, travel stocks got hit. you ought to be very careful because nonessential services do get cut back, retail did to the do well during that period. they did have a decline when they finally settled it. it let up and boom, first week of january it started rolling over giveagain. you have to be careful. do you want to buy rite aid up 10%? i don't know. rite aid probably goes to 5 and can you catch that 5%. i'd rather wait until everything comes down. >> should we have a the government is going to shutdown,
we don't know what's going to happen portfolio? >> rise above, partner. >> uh-oh. >> did you keep your button? >> after i read that boehner story where he basically said try and break out the lipton and the taso, and the teavana -- >> it's a tea party phenomenon. 80 congressmen. >> you have talked about stocks in the past that would weather this kind of uncertainty. >> international stocks. you can go in united technology, the charitable trust in honeywell, 3m. these are international companies located here. boeing is a classic example. everyone said they would be hurting defense. i think that every minute that boeing is open they get a billion dollar order. there was a billion dollar order
from airline i never heard about today. he's withone of the greatest ex of the world. >> you got to have your every day tesla mention. deutsche going to a $200 mention. >> i think he's anticipating that triple a is going to say it's a really good car. what does he have there? state troopers in nooj like the car. that thing is such a cult. i don't want to get in front of a cult. netflix don't get in front of, tesla, don't get in front of. what are the other three you don't get in front of? >> ulta salons, lumber liquidateors and tractor supplies. >> do not get in front of a growth stock between here and your end. if you get in the mind of a guy who likes tesla, he says, listen, it's a $400 stock. it's a $400 stock. that's what they say. they don't say it's a $190
stock. netflix is a $700 stock. >> i tell my little one always look before crossing the street and never get in front of -- >> is it gandhi plays with ralph bunch sitting around with -- >> nelson mandela. >> bishop tutu is behind the wheel there. >> there's not a lot of value to grand theft auto. >> it seems to be very popular. >> that doesn't make it good, david. >> dow is up only 4 points but 85 new highs on the s&p. let's get to bob pisani on the floor. >> we're seeing housing stocks move up, some of the cyclicals a little stronger here. did an informal poll from the traders. let's put up the full screen. number one, we got a fed that's going to keep the stimulus going, we have europe stable and china and japan improving.
a classic bit of understatement this morning, david tepper said it should be a favorable environment for the markets, i agree. that's what the fed appears to be very worried about. this is all still very fragile. i asked what about sectors in the next month or so should be outperforming? i got some emerging market inflows but there were a lot of caveats around that and interest rate sensitive was far and away the number one group, housing, telecom, reits and a lot of people felt the global economy is still to fragile to make a lot of investment there is. where do we go next? here's what's very clear on emerging markets. they have the -- bernanke has thrown them a real lifeline because for the moment they're going to be free of some of these currency devaluations they have been plagued with. it's only a temporary respite. a lot of negative comments that emerging markets have not
undertaken the fundamental infrastructural reform. traders have woken up to some of the longer term problems that these countries have not april dress -- addressed. they've got a little time now hopefully they'll address those. india is a two and a half month high, brazil already at a two and a half month high. they're off their lows already. we're going to have a quadruple witching tomorrow, the expiration of quarterly and index futures. these prices moved so far so fast that a lot of this is irrelevant. a lot of this unusual volume already happened. 1675 and 1,700 on the s&p were at 1725 and close to 1730. there's just much less action in those strikes that are out there. i think this quadruple witching is going to be a little less
relevant than it might have been in the past. right now we're basically flat on the dow. >> thanks very much, bob pisani. >> one thing we haven't mentioned yet today and perhaps a sign of quiet activism, though i haven't confirmed that,a agilent will split into two companies. this has been a name i've heard in activist circles for some time, though nobody has surfaced. unclear if you have an activist in a smaller position at least p pushing them to do this. you talked about this as a potential outcome. >> june 3rd we suggested they split into two companies. some activists said that's a
great idea. i don't want a fee. it's just a spinoff of hewlett packard. just cats and dogs. isn't it funny this would have been great business for hewlett packard now versus their regular business. life sciences and measurement and tests. remember hewlett packard, it was the oscillateors. remember, it was the first thing they did, testing measurements. this was the heir to originally their smart guys. i wonder what they would think of the company now. >> i'm sure they'd have a lot of thoughts. should mention that agilent hopes to complete that by the end of 2014. that's a long, long time. i talked to one shareholder who remarked on that being an awfully long time to get this done and it will require the approval of the board of directors at that point in time. some are wondering why so long?
can we really be assured it will occur? most likely it's going to. they already have a ceo designate of the new company. that is the current coo who will be running that. the current ceo will continue as ceo offa agilent itself. shrinking to grow. we heard it yesterday from chris ventresca at jpmorgan. that perhaps is one of the themes here. >> and he was not fined. right, he's just doing his job. >> doing his job, coming into work every day, trying to make something happen. >> the atm machine was fined, the nfl has fined jpmorgan $500 million. late hit. we've looked at the videotape, got the fedex envelope. >> in defense, what's the term when they hit them when they
can't defend themselves? >> why am i indefensible on that? >> want to shift to bonds and the dollar? >> why don't we do that. it something i wanted to do very badly. rick santelli is at the cme group in chicago. >> you said, jim, something today i agreed with. >> uh-oh. >> you said the 10-year had no demand at 290. you're spot on. that's why ben had to keep on with the artificial demand. don't disagree. who's going to buy those 10-years. everybody is calling it the greatest day for making money in a long time. look at the two-day chart and remember the 10-year based on yesterday and the day before moved a net amount of basis points of 16. 5-year moved about 20 -- 18 base points to be precise. why does it matter?
july 1st, the big moves of interest rates up. well, just before 4th of july to coming back we had bigger moves to the up side. why does it matter? i think it was more catching people off guard. i can't tell you how many people i bumped into this building that have been long 5s forever and waited the trade out. i understand how these things work. but i think in the end if you look overseas and look a at bund month-to-date, you can see much smaller moves. you can argue it's because maybe there's more stability in europe or maybe the outlook may be better but i caution maybe you want to take a reevaluation of the headlines after sunday night's election. think greece, think size of bailouts, international bank of settlements. do a little homework. is it going to be a $15 billion bailout package or closer to $50 billion, $60 billion, $70
billion. if we're going to look at girth and size, the area want to look at is how wonderfully the response was of the dollar index after yesterday. so people can talk about inflation or you can talk about commodity volatility. either way, one is just a little later to the parade. back to you, carl. >> rick, talk to you soon. rick santelli. we have two words for you, cool and zuckerberg. find out why after the break. also, google investors have big reason to smile. the stock is up more than 25% this year. is the tech giant spreading itself too thin by forming a new health care venture? "squawk on the street" will be right back. nascar is ab.out excitement but tracking all the action
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the move in metals really tells you what the market thought about the fed's inaction and the no tapering. it's really been relevant to the gold market, to the precious metals in general with gold up 4%, silver up almost 8%. even the platinum group metals are benefiting up about 3% or so. they were unable, though, to catch any up side momentum from the fed. the overhang in the oil market is the supply issue, the global issue with libya's supplies coming back online, as well as the outlook now in iran, with the iranian president now talking about not developing nuclear weapons, telling nbc news exclusively it's a change in stance and a change what is changing the risk premium that has been in the oil market for such a long time. back to you, carl. >> sharon, thank you so much. mark zuckerberg will discuss a meeting to discuss immigration reform.
he gave an interview yesterday about the future of the social network facebook. here's what he had to say. >> one of the things that i find interesting is people think that we're trying to be cool. that is like -- that's never been my goal. i'm like the least cool person there is. i want to produce something that is -- that's a really kind of fundamental service for the world. we're almost ten years old, right? so and we're definitely not like a niche thing at this point. so news angles are coolness are kind of done for us. >> if you look forward five or ten years, he said you'll found every within of these experiences people have around tv, music, health, finance will be redesigned to be around people. >> i believe that. >> taking a longer view. >> i think it's true. if he's untrue, what is it --
>> facebook is in your charitable trust. >> it's too big of a position now because of the rally. that's what happened with apple in the charitable trust. i trimmed a little back but i still believe in it, furiously believe in it. yelp, facebook. i put yelp in because that's also like tractor supplies and lumber lick quidators, it's lik cult stock. >> don't let your children get in front of it. >> right. >> do i think that facebook is a real stock. >> it's been an amazing story. here's what's coming up next on "squawk on the street." >> coming up, it's not exactly ocd behavior, but it's certainly something requiring order and nobody does it like jim cramer. six stocks in 60 seconds when
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dell's off about 8 points. let's get "six in 60" with jim. dr. pepper seeing action. >> goldman says this is losing its fizz. this is a company that a bunch of iterations, new drinks. looks like they're falling flat. i thought it would hold but it's not holding. >> and masco is near the top of the s&p. >> be careful that, is a quintessential home. now no taper. >> and updated groupon today. >> it's still not too late to buy groupon. they've fixed the business model, new management and is doing well. >> updated travelers. >> a lot of people worried about the last quarter, that's starbucks, not travelers. >> and pier one. >> i don't understand why they
missed. i think it's a very, very good company. if you tune in tonight, maybe we'll find out. this may be a buying opportunity. >> anything else on mad we should know about? >> i got international game technology. very controversial stock. i don't know if it should be because they had a really good quarter. >> and finally, big game tonight. >> andy reid, welcome home to philadelphia. >> is that how you're putting it, welcome home? >> well, i like the reids very much. i like chip kelly, too. and tammy reid is a friend of mine and she's sensational. >> it's going to be a good game to watch. see you on monday. when we come back, breaking economic news times three, existing homes, philly fed, lei and the market reaction in just a moment. ♪ [ female announcer ] you're the boss of your life. in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future.
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you lost that to a revision. let's dig down just a little bit. if you look at the employment index in philly fed, it increased from 3.5 to 10.3. if we look at new orders, they increased a big amount as well, large amount from 5 and change to 21 and change. so philly fed, surprises, lei delivers and we still have more data to come with diana olick. >> let's get to diana for more on the home data that's breaking. diana. >> reporter: existing home sales, simon, up 1.7% month to month. that's a big surprise to the up side. we were expecting sales to be down. we're at 5.84 million units. the realtors themselves saying this is, quote, the last hurrah. they say this was numbers from
june. these are signed contracts in june which go to closings in august. they say that was people respond together higher interest rates and jumping into the market in fear of rates going higher. they expect sales to go lower throughout the fall. median home pretty, $212,100. up 14% year over year. this is a mix of homes issue because the realtors use a median home price. home over half a million dollars are up 30% over a year ago. inventory continues to be the issue, down 6% year over year, just 2.25 million homes for sale, a 4.9 month supply and the realtors say they expect that amount to go down as well to keep places high because of low inventories. sales on pace at the highest level in six and a half years, even higher than the home buyer tax credit. carl? >> thank you very much, diana.
pretty good data. let's see what it all means for the economy, especially in light of yesterday's decision. steve liesman is back at headquarters with a lot more. >> good morning, carl. how you feeling? >> all in all, i'd rather be in philadelphia. >> good numbers yesterday. i want to look at what has changed in fed policy from the big june statement to the september statement yesterday. here's the timetable ben bernanke gave us in june. if uncoming data are broadly consistent with the forecast, they'll taper later this year. reduce further in measured steps through '14 and end purchases around mid year. yesterday if the data confirm our basic outlook and we believe the three-part test i mentioned is coming to pass, then we could move later this year. what's the three-part test? bernanke said confidence in job
and economic growth, the september employment report seemed to scare them. their own june rates stopped them from doing the taper. we are tied to the economy, woo don't have a calendar. here's what he said about future fed moves. >> asset purchases are not on a preset course. they are conditional on the data. they've always been conditional on the data. secondly, even has we move from asset purchases to rate policy as the principal tool of monetary policy, it's our intent to provide the accommodating monetary policy. >> the new forecast for the federal reserve, they mark down 2013, marked down 2014, kept '15 the same. one more thing i want to talk about. clear the fed has been saying more and perhaps explaining less. we counted up this morning the
average number of words in a fed statement. greenspan in '05, 170, bernanke ups it to 420. then up see the last couple of months with 720 words in the last statement. there's more to explain, there's more policy out there, it more complicated and there have been some big events. not clear to me the market is understanding more even while the federal reserve is saying more. simon? >> you know, steve, jim reed at deutsche bank said no one is particularly well connected to what the fed are actually currently thinking. it's important because if you don't know what they're thinking, by definition, they cannot be leading, steve. >> reporter: that's right, simon. and there's some very good and really agreed upon central bank theory, which is the fed needs to talk enough so that the market know when is things happen how the fed would react. they call it the reaction function. it feels a bit broken now,
simon. i'm not precisely sure why. is the market not hearing? is the fed not talking? but the last two big announcements, june and september, have led to outsized market moves and i think that bernanke would agree that's not what he really wants to happen. >> steve, we'll obviously discuss is further throughout the day. for the moment thank you, steve liesman with the latest on the fed. let's get to jpmorgan and its fallout from the london whiale. the bank is to pay almost $1 billion in fines. they're also extracting a rare admission of wrong doing from ceo jamie dimon. kayla tausche has more on that back at hq. >> good morning, simon. it's just one chapter in the london whale trading factor. the firm said it would pay the $920 million to four regulators that have been investigating the
situation for over a year, $200 million to the federal reserve, $200 million to the s.e.c. the s.e.c. settlement came with the rare admission of guilt acknowledging to the agency that its giant months-long derivative trade violated federal securities law. jamie dimon said in part, quote, we've accepted responsibility and acknowledged our mistakes from the start and we have learned from them and worked to fix them ". steps undertaken demonstrate substantial and healthy introspection as well as the seriousness of a commitment to a strong control environment. it just -- it seems like the regulatory issues keep on coming, especially where london whale fallout is concerned. and in a filing today the bank says it received a wells notice from the cftc, indicating cftc
staff have recommended a separate parallel action. so, simon, even though today's action is a big milestone for the firm and for regulators, this chapter and this book are not closed just yet. >> we should mention even if the fines for this particular episode stack up to over $1 billion, there's still the issue with regard to what jpmorgan was doing in energy markets. this is just one of many different battles that the firm seems to be caught in the middle of right now. >> and there's still an issue over the company's credit card collection practices and a lot of other issues that are ongoing. one thing people forget about with regard to the london whale yet, we still haven't seen the volcker rule. and rivals say it's been the single most painful issue for the volcker rule.
they say that regulators are continually point together london whale. of course we haven't seen the volcker rule but it's expected to be strict because of that. >> the london whale hurting liquidity. kayla tausche, thank you very much. >> stocks have calmed down this morning after hitting record highs yesterday after the fed announced it won't begin to taper this month. joining us now neal hennessey and ira, credit director at credit suisse. good morning. >> good morning. >> there are people who say i don't want to get involved. i don't want to buy at the top. you said the dow could end another 3,200 points from here, though. why? >> if you go back to the high in 2007, the price of sales ratio in the dow jones was approximately 1.7. today it stands at $1.40. if you go back to the high in
2007, the market wasn't frothy. the reason the market got cut in half is it was the only place for liquidity. between 2003 and 2007 depending on what indices you looked at, it was up on average but clearly not keeping up with real estate. so everybody went over to real estate, no money down, no paper work. all of a sudden that game to an end. where you going to get cash? it was the market. it had nothing to do with company profits and company profits as you see today are at an all-time high, well over $2 trillion. >> ira, there was a massive credit crunch in the u.s. economy. focusing on that event and where we've come, are you surprised rates are back below that $2.8 r 2.7 level? >> i'm not surprised interest rates have come back a little bit, particularly given that the federal reserve is going to be buying bonds for longer and a
lot of bonds for a while longer than we thought. risk assets in general, corporate bonds or stocks in general, there's going to be this continued liquidity. i'm worried what is liquidity like in fixed income markets, like the mortgage bond market where the federal reserve is going to be buying almost all of the bonds issued for the housing market. the story at the top of your show was about that august might be the last time you're going to have big home purchases for the next few months, which ironically is one of the reasons the fed didn't do anything yesterday, but on the other side they're buying all these bonds and there's not going to be enough of them out there to avoid liquidity problems in some markets. >> ira, beyond that, where are we now on the credibility of the fed? the most powerful thing the central bank has is the power of intent. you see it with the e.c.b., they
say we'll do all we need to do to continue the eurozone and the markets are contained. bernanke said they might taper by labor day, rip the heart out of emerging markets and now all for nothing. it not happening. there must be consequences to that, ira, are there not? >> it's very confusing. i think they have one more chance to try and be transparent and not lose their credibility in that transparency. the chairman yesterday was -- he made a comment that said he wasn't going to let the markets dictate what the federal reserve was going to do with policy, but the only reason why we believe that was because you had fed members, whether they were hawks or doves saying we're going to cut asset purchases in the fall. well, it the fall and they didn't cut asset purchases. now it's just going to be harder because they have to go through that again. if they're going to cut purchases in december, january or march of next year, they're
going to have to hint they're going to do it again. will we believe them? i don't know. >> neal and ira, interesting thoughts this morning. really appreciate it. >> meantime, oracle shares recovering a little bit after falling sharply. we'll tell you how you should be playing the stock. plus markets seeing some big upward momentum. is it time for a pullback? we'll find out which areas of the market may be at risk when "squawk on the street" continues.
shares of oracle are stable after the software giant reported a weaker outlook than analysts had expected last night. the managing director also covers microsoft, which has its analyst day today. brent, good morning. >> good morning. >> you could almost hear the sigh of relief that this quarter they didn't disappoint the market. >> they were 0 for 2 at the plate. q-4 was a decent outlook but that was disappointing. we think you're going to have to get to the second half of the year for oracle where the comps are very easy. oracle is a cash flow earnings story, not a revenue story now. we think they're looking for the next catalyst to put them into the fast line of growth. many of their software peers are outpacing them right now, crm, work day, a handful of
application names. >> what difficuvidend are they g at the moment? >> it's a modest dividend. oracle has been very aggressive on the buyback, as well as selective m&a. unlike microsoft where they focus on the dividend, oracle is focused more on the buyback. >> the stock hasn't really gone nip where over the past year, has it. you mentioned salesforce or workday. isn't there a better place to be than big tech like this? >> we think so. we believe that crm is a top pick for us. we've liked that story for a long time. it's outpaced oracle shares. our philosophy with investors is you have to bar bell low valuations and high valuations. we're not telling our clients to
go all hypered growth. i think bar belling has paid off with microsoft up 20% this year. i think that strategy has worked in that case with a low multiple story and low growth in microsoft as well. >> in the meantime we have a major meeting today for microsoft. there's a $40 price target you put on the shares. they didn't respond well necessarily to news of that dividend to news about the nokia acquisition. what are they going to have to say today to turn things around? >> amy hood, the new cfo, has to set the course for the financials and their journey to the cloud in mobile. everyone on wall street is trying to figure out how they get to the other side of the legacy world on the pc side to the cloud and to mobility. and we believe amy has to set that course. they also have to put the right ceo in. so i think from -- those are the next two catalysts. i think we got the ceo succession plan obviously and then the dividend was healthy. i think the buyback investors
were looking for a slightly more accelerated, larger buyback than they announced. >> what sort of ceo would you like? an elder statesman of the business community or someone who is younger, more cloud focused, more tech focused? >> i think it's a good question. you know, al malala at ford, there's a case where i think investors would be excited. also from an innovation perspective, that's what's lacking. so i think that they would like someone from the outside rather than the inside. so i think that's what investors want right now. i think there's a couple internal candidates they could go with but we're looking for the outside. >> it's a big ship to turn around. brent thill joining us.
>> who took the top spot this year? we'll tell you when "squawk on the street" continues. stay with us. [ woman ] i'd be a writer. [ man ] i'd be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] i'd be an architect. what if i told you someone could pay you and what if that person were you? ♪ when you think about it, isn't that what retirement should be, paying ourselves to do what we love? ♪
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dow's off about 10 points here. some experts think it may be time for a pullback. what's the general thinking? dominic chu is back with that story. >> reporter: many traders are still trying to figure out the meaning of yesterday's fed inaction. another reason they're in a holding pattern is stockings are throwing up a caution, a yellow, if you will. how strong is any market move and how sustainable is it? here's a look at the s&p 500 so far year to date. yesterday we hit a record high. today again another record high. before yesterday's record and today's record, we hit two other distinct highs, one in august, one in may. each of these peaks put by the s&p 500 had a statistical situation where a pullback afterwards was highly likely.
in august, that turned out to be a 5% drop. in may it was closer to 8%. so if the market drops by about what it did the last two times it peaked, we could see a pullback to 1626 in the s&p 500. if you still have that pullback, we can still stay in that current long-term up trend for stock. there is no crystal ball but traders are approaching with caution because recent history is one of the big reasons why is each time we've hit this peak this year, we've seen this kind of a pullback, kelly. no crystal ball but that's the reason why many traders are approaching the market with at least a little bit of caution, kelly. back over to you. >> all right. a lot of people on the short side carried out yesterday. thank you very much, sir. >> fortune is out with its list of the 40 stars.
first from blackrock, goldstein managing more than $500 million in assets. and john elkann has landed fourth. mark zuckerberg got the coveted third spot, the bronze medal. he's 29 years old and the youngest of the top five and in second place, jack dorsey, co-founder of twitter of course and the current head over at square, payments company, came in at second. the top honors this year, drum roll, please, went to the president and ceo now of yahoo!. yes, we know her well, guys, marissa maye r. >> i think what's really interesting is what those tech people, now that they've made their money do more generally through society. you saw google going to well being, an extension of life. here in new york a lot of talk of techies that have made money
is they will go into health care exchanges. >> policy makers in the health care segment have been desperate for innovation. if you look at what's happening to walgreens saying they're going to move employees going to some of the other exchanges -- >> if you can sex it up and make it clear, that would be a bre breakthrough. >> simon, it's not just the u.s. list. it is global. so bt's liv garfield comes in at number ten. >> hurrah. >> enthusiasm. >> i'm not there, you know? >> when we come back, former fed governor randy krosznel will give us his opinion on ben
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yesterday decided not to taper. here's what ben bernanke had to say. >> a government shutdown and more so a failure to raise the debt limit could have very s serious consequences for the economy and it's our policy to do whatever we can to keep the economy on course. >> john, how does boehner get out of the situation? he chose not to lead those 40 or so conservatives into some bipartisan deal but to follow them into conflict with the democrats. what happens? how do we get out? >> it's not clear how we get out of this, simon. what we have is an extraordinary situation in which the republican party has disconnected itself from rational economics or rational politics. every mainstream economist will tell you that the macro economic consequences of obama care, which they're trying to defund, are not all that great one way or the other, whether you like the law or not, but the consequences of a shutdown combined with a debt crisis are
huge. every political strategist in the republican mainstream will tell you republicans will get blamed for a shutdown in a debt crisis and it will hurt them in elections. that's why the u.s. chamber yesterday begged the house of representatives to raise the debt limits, it's why john boehner tried to dissuade the 40 renegade conservatives but he couldn't do it. the house is scheduled by the end of the week to vote to extend government funding while defunding obama care. that defunding provision is certain to fail in the united states senate. what happens after that absolutely nobody knows. and i think what the republican leadership is counting on, simon, what the white house is counting on is that enough alarm gets raised about this that ultima ultimately once the senate rejects what the house wants to do, the house leadership is able to rein in its members and raise
the debt limit without triggering this sort of crisis. >> we know the real alarm and siren tends to be the stock market. today it's only off 10 points. it will take more than that. >> it will take a lot more than that. >> let's go over to sharon at the nynex and natural gas. >> the number came out at 10:30, it was a surprise to the market, a rise of 45 billion cubic feet in terms of natural gas that's been put into storage the past week. analysts were expecting between 55 to 59 billion cubic feet. the fact that it was a smaller addition to storage is seen as bullish for the marketplace. natural gas prices hit a session high of 3.82. we're at a two-month high now, at least for natural gas prices and we've rallied more than 20% just in the last five weeks. we've seen some coal-to-gas switching, some nuclear power
plants that have had outages due to maintenance and we've also seen warm temperatures for this time of year across much of the country. a lot of people may have underestimated the type of demand that created for natural gas. >> thank you so much. >> what exactly is holding the fed back? randy kroszner is a former federal reserve governor, professor of economics at the university of chicago's booth school of business. he joins us from the windy city. randy, good to see you again. good morning. >> good morning. >> doesn't sound like you think a taper is necessarily coming this year at all? >> it's going to be dependent on the data. i mean, the chairman has always said that. the labor market has been less strong since he started talking about it in may, june. the previous months it looked like the labor market was on a sustained recovery path. stepped down a little bit over the last few months. we've got a lot of uncertainty
on the fiscal issues, as you were just describing. and the big backup in interest rates has potentially led to a slow down in the housing market. the fed has been focusing to make sure the housing recovery is sturdy. it doesn't want to destroy that with a little bit of taper talk. >> how does he get out of this box where he says he committed to communicating with the markets, which gives the markets some intelligence, rates do go up and then he's unable to tape are because the higher rates are affecting the economy. how do you bust that cycle? >> i call these open mouth operations, sort of talking what you will do with open market operations. i think wisely what they did to start talking about this in may/june when the economy seemed stronger but it gave them two or three months of gathering data to see what would be the impact on the markets and on the economy. that data came back not so
positive. so i think that's why they've sort of stepped back. i think it's actually useful to gather the data before just taking the plunge, like in 1994 with no warning. >> you know, randy, for those in the market, the last 24 hours have been really astounding. this is how paul donovan, global economist at ubs in london put it, he apologized to his clients in the past for having given his clients the thought that the -- that is not what you want to hear from ubs. >> i would disagree a little bit with that. think about the alternative back in 1994 when central banks didn't talk about what they were going to do and that was devastating. people were expecting some sort
of step-down now but the 10-year rate is still 60, 70 basis points higher. >> well, to the extent, randy, that the fed is trying to assert its will on long end of the curve, are they going to be able to beat the market should the market have a different perspective perhaps on all those different variables out there? >> and this is exactly why they're trying to calibrate their message so that they get the market reaction that they want. in the old days it was really simple because you just had short interest rates and you could raise the fed funds rate 25 points or lower it 25 basis points and the feds could pretty much nail that. this is new territory of using the open mouth and work the open end of the curve. it's still a learning process between the fed and the markets. >> randy, just a quick question. who is the best candidate to lead the federal reserve?
>> fortunately, the president has a very deep bench. and i think the front-runner now seems to be janet yellen. she would be excellent. i think don kohn would also be excellent. they would be valuable in leading the fed in this still troubled time. >> randy, on your time at the fed you chaired the committee on supervision and regulation of banking institutions. i'd like to you weigh in on the fines today that jpmorgan -- that are being levied against jpmorgan that it's paying, the bulk of it to the federal reserve. can you explain why it makes sense for a bank that suffered a $6 billion loss to follow it up with huge payments, even though taxpayers did not have to step in here? >> i don't know the specifics. it was a while ago i was on the supervision and regulation committee. i don't know the inside information that the central
bank has and the other regulators have about what they did. obviously if they had done something wrong and were inconsistent with proper compliance and inconsistent with the rules of safe and sound banking, then they need to be subject to sanctions. i don't know the specifics here, though, so i can't comment whether it was the right number or not. >> randy, i got one more question. just fly on the wall kind of give us some insight. when the chairman makes a decision that some believe is based on his forecast of congressional discord, right, a would-be shutdown, difficulty in passing legislation, how much political intelligence goes into the decision? how much does the committee know about the vote counting, where the political battle stands between the left and the right? >> so that's always much more of an art rather than a science so we don't have very good prediction models on this. but clearly the chairman and the fed is acutely aware of what's going on with those kinds of
battles. as you know, when the chairman testifies before congress, a lot of the questions posed to him are about fiscal policy rather than about monetary policy. there's a back and forth there. i don't think it comes down to individual vote counting. it's more the uncertainty that's around it. as we're getting closer, it's becoming clear it's not going to be a simple resolution. certainly the fed doesn't want something that is going to suddenly crater the economy and that the fed has to come in and clean it up later. >> that would be messy, too. randy, always good to talk to you about it. thanks for your time today. >> bye-bye. >> rand each kroszner. >> we've got new details on the chrysler ipo that's coming. kate kelly has more back at hq. >> chrysler's ceo has said his company is getting ready to go public. he's been awfully vague about what the details will be. we've been told like live
jpmorgan will lead and papers are being filed. the union trust that owns the remaining stake nicknamed viba has been far away from the valuation. he has pegged chrysler's value at at $4 billion and viba at $10 billion. marchionne has been reluctant to go public. it was a surprise then, kelly, to hear that jpm was likely in the pole position here with other participants to be named. of course given what i said, everyone will be very curious to see where the market values this thing and what size the offering will even be.
>> if, kate, it actually comes to market. this is to a certain extent marchionne's attempt to call the bluff of the unions, isn't it? >> absolutely. maybe some lawyers wrote it and it's on a top shelf somewhere. no one's been hired and no paper work is ready, even though he said to the ft a few days ago, we could be ready by this very week. >> kate, some great details there. thank you very much. as they go public. >> at bloomingdale's, the retailer taking big steps to prevent customers from buying a dress and returning it just the next day. we'll tell you about that when we come back. my cashflow can literally change with the weather. anything that gives me some breathing room makes a big difference. the plum card from american express
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that's after an upgrade to buy from hold. it's up 380% from its low back in november last year. steeple says there's more up side left because of better growth in the u.k., better mobile trends and better bargains. kelly, back to you. >> there are times when we all need a store with a forgiving return policy, when something doesn't quite fit or look the same at home as it did when you tried it home. but one retailer is pushing back against consumers who abuse the policy and bringing back close they've already worn. >> take a look. so this is a dress i bought at bloomingdale's yesterday. it came with this tag attached to it with the black plastic. i'm now committed to keeping this because i took the tag off. there's no way they say could you wear something out with this on it and bloomingdale's says that's really the point of this
new policy. it's a practice so common retailers have given it a name, wardrobing. >> people go into a store, they buy the merchandise, they wear it maybe once or twice and they return it. what people don't realize is it's an illegal process known as return fraud. >> reporter: in the most recent survey from the national retail fedderation, 65% of retailers say they've had customers return used clothing. >> they're losing almost $15 billion a year to return fraud. >> it's a cost that's passed on to consumers. >> when stuff like that happens, the prices go up. >> i'm pretty sure people do it too often. >> it can't be i'm just buying this to wear and and return it. >> bloomingdale's is returning what it calls a b tag on dresses that cost more than $150.
sale people put the tags on when shoppers check out and explain the dresses can't be returned once the tag is taken off. >> that's it. >> reporter: in a statement bloomingdale's says these b tags are in place to reinforce the fact that bloomingdale's will be unable to accept a return of merchandise that has been worn, washed, damaged, used or altered. >> i think for a store like bloomingdale's, attrition will happen because quite honestly, who wants to deal with a store with a difficult return policy. >> reporter: analysts say in the long run, the change will save customers money. and outside the flagship store in manhattan, many welcome the move. >> i probably wouldn't want to get a new outfit that's already
been worn. >> now, some of bloomingdale's competitors like nordstroms say they have no plan to do it. but stores have been doing things look this for a while, things like tracking returns and that's why they ask for your license, they're trying to make receipts you can't replicate or fraud in that way. this is an expensive problem. this is bloomingdale's way to try and do that. >> i can understand bloomingdale's being frustrated, but you also have to recognize there is a demand for people to wear something once for a party and then return it. if anything, that's why we've seen the popularity of sites like rent the runway. so from a strategic point of view, wouldn't it be smart for bloomingdale's or some of these stores to adopt more of that policy so people who want that option adopt it at the store? >> it might be. the problem is there are people who don't want to pay anything, don't want to aren't. they want to just buy and
return. i bought a gown from lowman's and i got it home and there were sweat stains and i got stuck with it. >> did they say it was you who wore it? >> luckily they didn't. it was something i should have looked closer in the store and they should be watching when people do make returns to see if it is damaged, if it's been worn. it's a problem. i was surprised yesterday when we were talking to people on the street how many people know somebody who has done this. >> it's good to see you. thank you for joining us on the network. kristen dahlgren joining us on the program. >> and coming up, mark zuckerberg says he and phafaceb are not cool. hear what he has to say when "squawk on the street" comes right back. ask me what it's like
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so both of you can get your best night's sleep together. the dow's in a tight range. down about 17. let's get to rick santelli exchange, over at the cme. hey, rick. >> hi, carl. we're going to go fast, so buckle up. yesterday, of course, we saw ben bernanke kickin' the can of normalization down the road. the day before, the cbo released
the long-term budget outlook. i really like this. 121 payments. yeah, i'm wonky, i read it. but what was interesting is chapter 6, budgetary effects of alternative budget policies. why is that important? it's based on debt-to-gdp. ask your mom, wife, girlfriend, what's debt-to-gdp? it's kind of -- you know, it's in the weeds. so ffy, and my friends at san economics, used chapter 6's own numbers, social security administration data, the debt clock, and they changed it to something we all understand. instead of debt-to-gdp, projected government debt per taxpayer. in constant 2013 dollars. go to that debt clock, and you'll see that per citizen right now, it's about $50,000 ahead. and per taxpayer currently about 150,000 a head. as you can see on this chart. so the baseline, which is the only chart that's in that cbo report basically, is this blue one. now, the next two are created from their own data.
the data effects to the economy according to the research, basically what we're talking about is unemployment isn't going to always be full. we won't only have growth and no recessions. so the alternatives get figured in. so what you end up looking at, as time goes on, you're actually going to get up to about 1.2 million per taxpayer 2056. 600,000 in 2044. and we all heard ben yesterday, of course, that by, you know, spending more of these, we're going to get a big economy and it's going to grow, more promises, more promises. the problem is that we have a wimpy economy, and in the words of the famous wimpy and popeye, okay, here's what we end up paying. and instead of getting this as an economy, this is the bill we're getting. this is the bill. this is the bill, by kickin' it down the road. but what do we actually end up with? we end up with this. we get this, we get billed for this. so no matter how ben wants to
make this thing look, it's still a little cheeseburger with a pretty darn big price tag. back to you. >> all right, rick, but real quick, you do admit, sir, if you're looking at debt-to-gdp, you have to keep the gdp portion growing, not shrinking, right? >> oh, i completely agree with that. what i don't like is how we play fast-and-loose with statistics. at the depth -- at the depth of the recession, we say we're making all of this improvement. when in actuality, the debt our kids are going to pay, it's pretty constant and it's rising -- it's rising faster than any bread dough i yeast-ified. >> all right, rick, thank you very much. up next, mark zuckerberg insists he and facebook aren't cool. and later, why the fed's decision not to taper may be cooler than most realize. we'll be right back.
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mark zuckerberg is on capitol hill today. he'll be attending a meeting with all people house speaker boehner to discuss immigration reforms. zuckerberg gave an interview to "the atlantic" yesterday about the future of the social network, and here is what he had to say. >> the things that i find interesting is that people assume we're trying to be cool.
>> i didn't -- i don't -- >> i'm, like, that's never been my goal. i'm the least cool person there is. i want to produce something that's a really kind of fundamental service for the world. we're almost ten years old, right? and we're definitely not a niche at this point. >> i think to be 29 and founded a $110 billion company is cool. i don't listen to hip-hop. >> $111 billion, you talk two gms, the global reach, the number of users and the things they're talking about. they're five and ten years down the road. being cool is not his priority. >> what's the broader point he's trying to make about the company? they won't focus overtly and spend money in trying to buy or build some of the cooler kind of apps or -- >> in the beginning, the s1 was we will be cool.
we wasn't profit maximize, remember that? and then they decided we better monetize and profit maximize. he is less cool than he was. >> and instagram, too, that's next. here's what you missed earlier on this morning. >> announcer: welcome to "squawk on the street." here's what's happened so far. >> they have telegraphed tapering. it was in the market. they could have startinged the process. get us off the dope. it wouldn't have cost them anything, because it was in the market. and to me, they blew it. an exclusive statement from david tepper, that they are not worried about inflation in the next few years, and want growth first, growth second, and growth third. the cross-border regulators are levying a $920 million in fines against jpmorgan for faulty oversight related to the london whale trading debacle. bernanke, i think, showed some foresight. can imagine four weeks from now
it turns out he tapered, sand people said, what an idiot, he didn't see this coming? >> well, if congress is the bar, if congressional discord is the bar you have to hop over in order to taper, then we'll never taper. [ bell ] >> existing home sales, simon, up 1.7% month-to-month. that's a big surprise to the upside. now, it will just be harder. remember, they have to go through this again. if they're going to cut purchases in december, january, or march of next year, they're going to have to hint that they're going to do it again. and will we believe them? i don't know. there has been a bit of tightening that's gone on in the market. maybe not as much as some had expected. and i think more than the today had expected. and that's why they're taking a pause. good morning. we're live here at post 9 at the new york stock exchange on this thursday. let's get a check on markets as we continue to look at markets at or near all-time highs after the fed meeting today.
the dow giving up about 17 points from that level at 15,659. and nasdaq and s&p green, just barely. the nasdaq is up by 3 or 4. shares of conagra slipping today after the first quarter earnings missed estimates on the top and bottom lines. the company's ceo did sound optimistic, saying he still expects to post good earnings for the rest of the fiscal year. shares aren't listening, down 4%. shares of rite aid are rallying. they posted a second quarter profit and boosted earnings outlooks based on continued sales growth. shares up, look at that, almost 16%. so who needs the taper? stocks rallied yesterday after the fed decided not to act and left its bond-buying program intact. but did the fed actually do more for the economy by doing nothing? we'll explain in a moment. plus, eat your heart out, hollywood. take two's new video game "grand theft auto v" making
$800 million in its first days in the stores. and can google solve death? that's what the fund page of "time" magazine is asking. we'll tell you what they're talking about and what it may mean for google. and a major shock to markets yesterday when the fed decided to delay any tapering. here's an interesting question, though. did the fed actually do more by doing nothing? we want to ask kevin ferry, an independent trader, cnbc contributor, and he joins us now. kevin, good morning. >> good morning. the bull market and uncoolness. >> wul bull market and uncoolness, exactly. we were talking this morning, to jim, about a major, major move in the 10-year falling like it did. what are your thoughts here? >> well, i think two things i'd point out. first is that the marketplace, prior to the fed in the days leading up to the fed, had a dramatic reduction in open interest. and so, many of the alleged bears are people that were
looking for higher yields had already exited the market. and after the fed move, we saw the turn premium, which i think is the major story, in forward rates come down. but not dramatically. so, you know, i think there's a lot of hype. the reality is the term premium had blown out on them while they were at full l sap anyways, so i think we're probably overanalyzing this whole thing a little too much. >> so what do you mean, then, you drill through that noise, where does that leave us? >> well, actually, a little bit better off. if you look at treasury supply, tax revenues are at an all-time high. so you're going to see more paydowns going forward. the flip side is, in the mortgage market, the rate move has caused a reduction in origination. and so, everything else held equal, the fed is actually easier today at 85 billion than they were before, from a supplies standpoint.
>> so are you saying, kevin, they made the right move or the wrong one? >> i don't know. i can't really -- you know, i'm not really into value judgments. all i know is that the relative harm from a -- from a do-no-harm standpoint was rather mild. i mean, it could have been worse, because the market had definitely been in front of them. >> yeah. >> by our calculation, they could have cut 40% of the taper and still been the forward term premium is all right with it. >> you mean that's what markets had priced in at that point? >> by my calculations, it was over 40%, yeah. >> yeah, well, i say -- >> i say go for it. >> that's what miller's point this morning on "squawk." they had a freebie, everything was ready to roll, and they just saw something -- maybe we'll find out, maybe we won't. but i just wonder if you think that the -- would the reaction have been dramatic if they had gone ahead? >> not past the first 15 minutes, carl, no.
it might have been a little bit positive, because you are really monkeying around with the shape of the yield curve out there. you know, we don't know what will happen tomorrow, and we certainly don't know what will happen 30 years down the road. but i think the net-net is we're going to go down this path ag n again. the actual reduction in term premium so far is not that great. so that -- >> yeah, that's interesting. yeah, kevin -- >> so stability going forward, maybe we'll get more benefit from that. >> exactly. we've been talking a lot about volatility and the big moves in rates, again, relatively speaking, up and down basically all of this time going back to may. >> yeah. >> if the fed were a little worried about that, about that movement and what it means to people holding onto these assets, you're saying that yesterday didn't do a lot to fix that. in fact, it's kind of maintained the status quo. >> right. and, in fact, the only way to fix it is over time, kelly, is what i'm saying. so if the fed can hold some stability, then you ride up the curve. but the fact of the matter is, i
think we're going to revisit this a few months down the road, and then we'll -- and then we'll see. key difference. in may and june, the market was seizing up. you had china problems, you had other problems in europe. the very front-forward funding rates were rising just as much as the back. the rest of the summer, that's not the case. and you had this dramatic blowout in the curve. i mean, i even commented -- i think the curve past "voyager" on the way out of the universe. the thing is we've never -- never been in this place before, so the ability for me to understand what's going to happen is -- i'd be lying if i told you i was sure about it. >> kevin, some economic bloggers are out there saying the smart thing for the fed is to actually pull in some buying, right, essentially, initiate a taper, but only tell us after the fact. do something nominal. do 5 billion that no one's really going to notice, and then when we come public, say it was happening all along, you guys didn't even feel it. >> right. well, okay, two things. one, the fed doesn't like that
overtly tricky, because they're trying to get into this transparency thing, which i'm on the record as saying, it's stupid. the more open they are, the more dumb we look. i would say the reality is, carl, i think that that's exactly what will happen from a supply side. if the production doesn't happen, the fed will be buying less, and as my friend david shay said, only seven people in the business will know it. >> yeah. on international talk like a pirate day, there is no other man i'd rather see leading the hour, kevin. thanks again. >> all right. >> kevin ferry in chicago. argh! stocks trying to extend the no-taper rally. the markets hit highs yesterday. bill stone is chief investment strategy, and lori is from miami. good to have both of you with us this morning. >> thanks. >> thank you. >> bill, what does this do? how many buy signals does this
trigger, if any? >> you know, i don't think it really changes the buy signals, because i think what you're really hearing is, generally speaking, it's just going to push the taper out, whether it's next month or maybe december, you know, obviously they really spoke to the fact that it's data-dependent. at the end of the day, it probably shifts it out a bit. you know, i would say keep your eye on the ball in the sense that, you know, maybe we have a repeat of what we saw prior to all of the expectations building up for this taper. >> dorothy, your thoughts? i mean, 1,725. that would have been seen as an aggressive year-end target just a week ago. >> yeah. i would agree, though, nothing has really changed. it's only a question of when, not if. and it's going to add volatility to the market, uncertainty to the market, which actually will give opportunities for managers who are going both long and short to try to make some money here.
but nothing has dramatically changed. >> bill, what do you think most people are going to do here? are they going to look to the period between now and year end and try to jump in and goose and chase this market? or do they get conservative and kind of sit back and pull in their horns here? >> well, i'm going to say maybe you have to go with, i guess, the history, which is people tend to chase the returns. so i do think it's more of a reason to maybe expect that you get some more flows into stocks. not to mention, you know, what we've seen is, you know, we've seen the front end, you know, how you even go out five years, and you're still stuck at negative real rates, which continue to kind of force people to want to go out to risk assets. so i do think it at least in some intermediate timeframe, maybe we're ahead of ourselves, because we jumped up real quickly on this, but that it still tries to force money, or it does end up forcing people to still look towards risk assets.
>> you know, dorothy, some people say that what the fed did yesterday -- even if it was precaution against a government shutdown -- made the odds of that more likely, because now the market's at all-times highs and and people can play around with the system. what are you saying to clients about all of this? >> i think that it's -- the politics of it make everybody nervous, and the fact that the fed is having to react to not only politics in terms of what's going to happen with the debt ceiling, but the fact we politicize the next chairman of the fed, which was supposed to be sort of a non-partisan adventure, and as we saw last sunday, that now has become a political football. so all of this just adds a lot of uncertainty, a lot of volatility, and i think it is very hard to think you can just ride the market forever. there will be market timers, i'm sure they'll get out in time. but i think nimble and opportunistic, who are trading around the markets, will end up better off on a risk-adjusted
basis. >> bill, in terms of sector allocation, i think of the new highs we're getting today, i think maybe a quarter, maybe half of them are industrials. do you chase sort of a china rebound? or do you go back to names that are going to yield more than the 10-year? >> you know, we would stay with kind of the theme of i'll call it a tilt towards the cyclical, we've been -- not been talking about that for a while, because we still think you're getting that -- i guess i'll call it the continued expansion in the economy. we think the economy's going to grow in the u.s. by something, like, 2.3% here in the second half. so we still think that's the way you should be. not to mention what we kind of mentioned earlier, europe, not maybe a strong recovery, but maybe not in intensive care, barely moved out of that, but okay, it's moved out. and china is no longer maybe the worry that it was not too long ago. >> all right, guys, thank you very much for your thoughts this morning. bill stone, dorothy weaver. >> thanks. >> as we continue to watch the markets here, carl, dow is off
about 30 points. >> thank you. who says video games can't keep up with hollywood? take two's grand theft auto v made $180 million on its first day in stores. the company's shares are rallying, but stay tuned. we'll let you know if we think the good times will last. plus, rick santelli taking a closer look at the fed. >> absolutely. let's put everything together. kevin ferry's comments, dovetail with stan miller's comments, which is basically, they were there. why did they stop with regard to fed and the taper? we have peter who will weigh in, because he sees it like i do. i think ultimately, it's a fight between the real market and the fed's managed market. who's going to win? we'll discuss who we think may win in about 15 minutes. ♪
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are. this has been a top priority from the start. part of the reason we set up this export council was to make sure that we were in a position to meet our goal of doubling exports during the course of a fairly short period of time. and we now sell more goods overseas than ever before. jason, correct me if i'm wrong, but i think our current account deficit and trade deficits have narrowed as significantly as we've seen in a very long time. now, part of that is because we're importing less foreign oil and increasing domestic production. but a lot of it is because we're selling a lot of great products all around the world. and this council has done a great job in helping to guide our policies. we've got large businesses, we've got small businesses. we've got medium-sized businesses. we've got services as well as manufacturers.
and your input has been enormously important in this entire process. part of what we've seen is a continued transformation in american business to become more competitive and more productive. and i would be remiss to say, since it's in the news quite a bit, to note that one of the reasons our businesses are more competitive is because healthcare costs have actually stabilized relative to what we had been seeing in previous years. just an interesting statistic here for folks who may be interested. [ laughter ] thanks, in part, to the affordable care act, also known as obamacare. [ laughter ] the cost of healthcare is now growing at the slowest rate in 50 years. employer-based healthcare costs are growing at about one-third of the rate of a decade ago.
and just yesterday, cms estimated that healthcare spending grew at its second-slowest rate ever in 2012. it will grow at its third-slowest rate ever in 2013. growing at the slowest rate in 2011. so the three years since obamacare passed, we've seen the slowest growth in healthcare costs on record. i think this is critically important to recognize, because one of the huge competitive disadvantages that our businesses have had is that we -- american businesses oftentimes are shouldering healthcare costs that their competitors are not, because they've had a more efficient, more effective system. and so, for us -- and when we passed the affordable care act, by the way, there were all kinds
of arguments about how all of the cost savings weren't very meaningful and weren't going to do a lot, and we weren't really bending the cost curve. well, it turns out actually a lot of what we've done is starting to bear real fruit. and it has an impact on the bottom lines of american businesses as well as the american people. so if the current trends hold -- and all estimates are that, in fact, they will. this is not just a by-product -- or hangover from the recession -- we're going to see a continuing slowing of increases in healthcare costs. that's going to boost our exports. now, we can still do more when it comes to exports. and thanks in part to new trade deals that i've signed as well as obviously really great products and services that you all have designed, america now exports more to the rest of the
world than ever before. we're on track to export even more this year. last year, $1 billion in exports supported nearly 50,000 jobs -- or 5,000 jobs in the united states. so for every $1 billion we sell, it's 5,000 new jobs right here in the united states. and so, we're really focused on how do we keep that momentum going. our in trade rep, our new ambassador, michael frulman, who many of you have had the chance to work with when he was in the white house, is in the process of trying to complete negotiations around a trans-pacific partnership. you're talking about the larg t largest, most dynamic, fastest-growing market in the world. and because of some incredibly hard work by michael and previous -- >> that is the president speaking to the export council in washington on a day where the current account deficit is at a 15-year low. kel, 2.4% of gdp.
we see that all of the time in boeing sales and the sales of multinationals. no comment, though, on any would-be bill in the house that strips away elms of obamacare, something the white house today said they would veto. >> exactly. i'm sure they feel like his views on that are pretty clear. but he did again emphasize the fact that healthcare costs are coming down, and subtly a reference to all of it. >> we'll keep you apprised of any comments that come out of that speech to the council. meanwhile, $800 million in one day. that's how much take two's new game made. we'll tell you if you should buy the stock, in just a moment. neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above. we're not simply saluting history... we're making it.
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welcome back. sales of take-two's new interactive game "grand theft auto" has smashed records in just the 24 hours it's been on the shelves. the question now is whether shares here are a buy. let's ask daniel ernst, principal at hudson square research, and joining us is julia boorstin. good morning to you both.
>> good morning. >> daniel, shares today are only up about 1.5%. you know, a decent ralliment but for the size of the sales here, it sounds like expectations to some extent were even bigger. >> yeah, i mean, i think, you know, take-two and a lot of the consumer tech stocks, you know, have the apple problem. no matter how good you do, everyone says, well, that's the top, they can't possibly do better in the future. no one gives them credit for the actual earnings that they're generating. because video games, there's a base cost to put that game out, and pretty much all of the excess falls to the bottom line. so our numbers for the current year, about $2.44 in earnings. this could take them close to $3 a share in earnings in the year. the stock is 17. you know, it's trading at just over six times earnings. it's kind of silly. but the problem with take-two is that historically, they've only ever made money on this one single game, and so, i think a lot of investors have that in
mind. so then, this next year, they would historically lose money. but a couple of things that are different. since the current management team came in, they stripped out a lot of the loss making games. they streamlined the products. -- a game from take-two called "bioshock" which didn't exit in the last generation. they've done a lot of that. also, given the size of the install base, probably around 13 million units in just one day, they have a bigger installed base than "world of warcraft," which gives them tremendous runway. so digital updates, add-ones to the games, anywhere from $15 to $60 a pop. >> kelly, the key thing here is digital. this time around when take-two is releasing this game, they are offering significantly more digital content than five years ago when the last game came out.
this could contribute another $100 million in revenue to the company. and i think the key thing here is whether or not they can translate the success of the game in its first day to continue selling games over the rest of the holiday season, and then to continue to sell the digital content. if they can -- you know, the problem with take-two has always been its lack of diversification in terms of games. if they can really build up that digital revenue, which is the gift that keeps on giving, rather than a one-time sale, that would make a big difference for the company. >> great point. julia, i guess it's one we'll have to wait and see during the holiday season. thank you for your perspective as we watch shares up a little less than 2%. we'll keep an eye on broader markets, as well. the dow is off about 20 points. "squawk on the street" will be back in two.
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the european markets are closing now. it wasn't just the u.s. that responded well to the fed announcement. >> you have to remember the european markets were shut down when bernanke said no action. this is full catch-up to five-year highs in europe. and gold up 7%, silver up 7%. the mining stocks are leading the charge there. the fact that you have easier credit conditions from the fed, obviously also helped in europe. the banks are higher today. a big discussion about whether that trillion euros that the banks are sitting on, whether that three-year term will be extended for them. jpmorgan suggesting there will be further injections from the ecb -- easing if you look -- the beginning of next year. the banks are doing well. i want to make the point that
actually while we're at record levels here in the united states, if you have a look at a long track of europe versus the united states, they are just in europe at five-year highs. they're not at the record highs that you're seeing here. and one more, silvio berlusconi, of course, yesterday, gave the very aggressive attack on the italian judges who have conviktdconviktd -- convicted him of fraud. here's what he had to say in his release. "i am innocent, i am absolutely innocent." in response today, the prime minister of italy has said he will not allow -- he will not allow his coalition government to become what he called a punching ball by silvio berlusconi, so the coalition continues, as berlusconi tries to reinvigorate with a new party down the line. >> wow, we think our government's got problems. that's an interesting story. thank you very much. let's get a check on energy
and commodities. sharon epperson at the imx. >> it's the post-fed prefrenzy. they've been up since the announcement and rallying into the evening. we're seeing big gains not only in copper but in palladium and platinum, itself. the biggest gainer definitely silver. silver up 8% since the 1:30 floor close we saw in the komx yesterday. keep in mind, a lot of folks are saying, why are we seeing such gains in the futures for precious metals but not in the gld? and it's because it's priced off the futures and much of the gain we're seeing in gold futures came at that time. so we're just seeing a slight up tick right now in that gld in today's session. also keep in mind as we see the no tapering, the fact that qe will continue, and we talk about
the benefit that that has had to the stock market, we are going -- carl, back to you. >> sharon, let's take you to washington, d.c., house speaker john boehner speaking. >> when it comes to the healthcare law, the debate in the house has been settled. i think our position is very clear. the law's a train wreck, and it's going to raise costs. it's destroying american jobs. and it must go. we'll deliver a big victory in the house tomorrow, then this fight will move over to the senate where it belongs. i expect my senate colleagues to be up for the battle. and while that fight plays out, we engage in another set of challenges, the debt limit. and more importantly, the debt itself. and let me be very clear. republicans have no interest in defaulting on our debt. none. we just want to find a way to pay it off. that's why the house will act on a plan that will reduce the deficit and includes pro-growth economic reforms, including a
delay of the president's healthcare law. there's a common sense principle here. if you're going to raise the debt ceiling, you should work to reduce the deficit and grow the economy at the same time. now, the president's remarks notwithstanding. you know, the white house may not get it, but frankly, the american people get it. every major deficit reduction plan over the last 30 years has been tied to the debt limit. in 1985, president reagan signed the grand rudman -- graham-rudman's bill that included an increase in the debt limit. when president bush reached a budget deal with the democrats here in the congress in 1990, it included an increase in the debt limit. president clinton reached two similar agreements, both tied to the debt limit. and i would remind president obama himself that in the summer of 2011, there was a major deficit reduction bill enacted
with an increase in the debt limit. this time should be no different. in fact, i think it's more important than ever. a report this week from the congressional budget office makes it clear that our debt is set to grow rapidly in the coming years if we take no action. that's why it's so troubling that the president's decided to just sit out this debate. he says he won't engage. well, you know, most presidents refer to their bipartisan efforts to reduce the deficit as achievements. the president sees this, quote/unquote as extortion. so while the president is happy to negotiate with vladimir putin, he won't engage with a congress on a plan that deals with the deficits that threaten our economy. now, let me just be clear here. a debt limit increase without any reforms to lower our deficit just isn't going to cut it. not when under this president
the united states has racked up $6 trillion worth of additional debt. and you can see it right here. so when the president took office. look what's happened over these years, and look what happens out into the future if we don't do something about our spending problem. so a bill that does nothing to deal with the deficit is really telling the world that we're not willing to deal with our spending problem. the president needs to recognize that we've got a shared responsibility to govern. you can try to stay on the sideline, but here in the house, we're going to lead. >> mr. speaker, yesterday some comments came over from conservatives in the senate that rattled many conservatives over here about what might happen when the bill goes next door. you say your senate colleagues will be up for the battle. are you convinced now that ted cruz is up for the battle next door? >> well, i'm not going to speculate on what the senate is
going to do or not do. but the fight here has been won. the fight over there is just beginning. >> -- speculation, because he said they've -- they've already said the fight's over here and they hope house republicans can (unintelligible). what's your reaction to -- >> i expect my senate colleagues to do everything they can to defund this law just like the house is going to do. >> mr. speaker, if they don't do that, if they don't -- >> i'm not going to get into the ifs, ands, buts, all that nonsense -- >> -- members will allow you to go to -- you need the cooperation of pelosi, and is it incumbent on -- >> i'm not going to speculate on what the senate will or will not do. >> mr. speaker, do you expect to have debt limit vote next week, and what are the must-haves -- >> we're going to have a conversation with our colleagues tomorrow morning about how we would proceed on the debt limit, and after that conversation,
we'll probably have more to say. >> the chamber of commerce is saying house republicans don't do this. senate republicans are saying, almost universally, don't do this, this is a losing strategy for republicans. >> to do what? to do what? to do what? >> to tie funding the government to defunding obamacare. >> listen, obamacare is driving up the cost of healthcare. it's destroying millions of american jobs. it is a train wreck. it has to go. we've done everything humanly possible over the last two and a half years to make our point, and we're going to continue to make our point. >> senate republicans say they agree with that. they just don't think this is the vehicle. they think republicans are going to get blamed -- >> well, guess what? we're having the fight over here. we're going to win the fight over here. it's time for them to pick up the mantel and get the job done. >> speaker boehner, in a recent interview to nbc news, the president of iran said they would not use nuclear weapons ever, seemed to strike a more
moderate tone, as well as said -- put the question of holocaust denial saying he's a politician, not a historian. do you have any comments about the recent words of the president of iran? >> actions speak louder than words. and i think it's time for the iranians to take actions to show the world that they're not interested in producing nuclear weapons. >> the debt limit. how do you expect these negotiations that you're calling for to proceed? you told your colleagues earlier in the year that you didn't want to go back to the, you know, shuttling over to the white house -- >> oh, i'm not doing that. i'm not doin' that. >> how do you want to proceed? >> the house will pass a bill. it will be up to the senate to pass the bill, and i would guess the president would engage with the majority leader over there, if he so desires. jonathan? >> mr. speaker, you said yesterday (unintelligible). so who yesterday did you listen over the last few days were you listening to?
and who do you think is running the republican -- >> listen, we have a diverse caucus, frankly, so the democrats have a very diverse caucus. republicans, by their very nature, are a bit more independent than our colleagues across the aisle. i've seen that from the day i got here. and so, whenever we're trying to put together a plan, you know, there's -- we've got 233 memb s members, all of whom have their own plan. it's tough to get them on the same track. we got there. david? welcome. >> -- get around doing (unintelligible) -- farm bill -- >> as soon as we can. >> can you be more specific? will you name -- cantor -- (unintelligible) [ laughter ] >> i love those editorial comments that come along with the questions. >> after we pass the nutrition bill today, we'll send it over to the senate, and as i understand it, the senate probably will have to reappoint
conferrees, and when they appoint the conference, we'll appoint our conferrees, as well. [ question inaudible ] we'll see. >> thank you, mr. speaker. are you willing to violate (unintelligible) -- >> we expect to have the votes tomorrow to pass the c.r., and we'll take it from there. [ question inaudible ] i won't speculate on what the senate's gonna do, not do, and where the votes are. it's way too early for that. we'll have plenty of time next weekend to discuss that. >> and that is speaker boehner talking about what he called a train wreck, in his words, what obamacarry sexuallysex ually --e is. he the market not surprisingly,
clockwork, 10-year ticked up to 2.73, just starting the money at 2.7. >> you have to wonder if that's a little bit of pricing in the fact that we get even close, carl, to anything like a threat of not paying investors, even though he repeated that they wouldn't do that, shut down the government instead. >> yeah. meantime, talking when his diverse caucus, john harwood is in washington and listened to the comments and will make sense of how becamer balances the caucus with the karl roves who's saying he shouldn't go down this road. >> reporter: the balance he struck right now is to let the people who want to shut down the government, who want to defund obamacare, have the vote that they want to have. that's going to happen tomorrow or saturday. undoubtedly, that will pass the house of representatives. the speaker didn't want to speculate, but he knows, as everyone in washington knows, that that will not pass the senate. and what comes next, john boehner doesn't know, harry reid doesn't know, barack obama doesn't know. i expect that what he is hoping,
and this is why he didn't address the question of, "will you put something on the floor even if a majority of your members don't support it?" he's trying to preserve some wiggle room for if the senate strips out the obamacare provision and tries to extend government funding, he wants to preserve some maneuvering room he could put that on the floor and pass it. the same is going to be true on the debt limit. because they're planning to move a debt limit bill that would delay obamacare. that's something that president obama, the white house, the senate, democrats will never agree to. and so, what is standing between the united states and a shutdown and default is whether or not john boehner can get enough control over his members in the house, or disregard some of those members in the house and get votes from nancy pelosi and the democrats to pass legislation that opens the government and avoids a debt crisis. but the whole situation has gotten a lot hairier, carl and
kaelly, than i thought it would get a month or so ago, because the desire among leaders is very strong not to shut down the government, not to have a debt crisis, because they know it would hurt republicans. they just can't stop it right at this moment. >> yeah. karl rove and others, the "journal" op ed -- >> kamikaze pilots. >> could be worse than 2005. >> reporter: that's right. when i talked to republican members of congress political strategist, the republicans have a firm grip on the house of representatives. they're highly unlikely to lose control of the house in 2014 unless we have a crisis provoked by this situation. that could be the one thing that not only tips the economy into recession, but tips republicans out of control of the house of representatives. >> john, thank you for that. john harwood joining us in washington. the dow still down about 29 points. let's get to rick santelli in chicago. rick? >> well, you want me to talk about that or you want me to bring in my guest, carl? what do you think? i tell you what, i'll weigh in
on it. i'll weigh in on it. listen, the last i looked, there wasn't an election that put karl rove in office. the last i looked, the "wall street journal" op ed writers aren't, you know, dealing with counting the votes that put them in office. there's something called principle. peter, i know this isn't what we prepared to talk about, you know, i was raised that maybe it isn't about the outcome of the elections or perpetuating having a job in government, maybe, you know, the elected officials from the 2010 midterms will do their job, and if they lose, fine. at least they tried. what are your thoughts about that? >> right, well, they're going to put on the table the vote. and it will be for all -- everyone to see that they are against funding obamacare. what happens next is really the most important thing, because we'll have the symbolism of it, but then we need to deal with the reality that the fiscal year ends in 11 days and then soon after, they have to deal with the debt ceiling. so there will be somewhat of emerging with the ideology and also the reality of governing. >> i agree.
now, let's switch gears to the fed. i loved your piece today. and i have to say, it reminded me of things i said over the years that there will ultimately be a duel, and the duel is the ability of the fed to manage rates and the markets to price discover in a free-market fashion what rates ought to be. your thoughts. >> absolutely. i think in the eyes of many market participants, including myself, and certainly you, the fed lost a lot of credibility yesterday. they singed the markd. the bond market is the fed's transmission mechanism in conducting policy. everything stems from what the bond market does in response to their policy. if they lose the confidence of the bond market, which i think they've already begun to, then they lose control of policy. so going forward, the bond market is going to focus less on what bernanke says, because of what he did over the past four months, and leading them down one road, and then pulling it back. and focus on the economic data, the inflation numbers, and where
they think normalized interest rates should be, rather than where the fed thinks they should be. >> listen, peter, wire out of time. there's one more variable real quick. and that is, they might not have put the evicted notice on the door, as many thought, with regard to qe. but i still think that everyone knows it's coming and the bond market and bond redemptions may continue to be the main driver of potentially higher rates. thanks for taking the time to be our guest today. >> thanks, rick. >> back to you in the studio. >> all right, rick, thank you for your time. more details on jpmorgan's nearly $1 billion settlement announced this morning. coming up when we come back after a short break. stay with us. my mantra?
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big news this morning. jpmorgan agreeing to pay $920 million in fines as part of the london whale case. our kayla toushe has the news. >> it's a trifecta this morning. nearly $1 billion in fines levelled over the bank's mishandling of the london whale trading debacle. four regulators reached a coordinated settlement in the investigation. the s.e.c. got an admission of guilt from the bank. the occ $300 million. they'll also collect the steepest single fine. the cftc is investigating the matter and on monday gave the bank a notice that the staff had
recommended separate enforcement actions on the london whale. it's unclear what that would allege, but the agency had been investigating whether the bank was manipulating credit markets. the occ issued a consent order over their practices to collect past-due debt from auto and student loans, as well as from active military members. they must overhaul the unit, figure out how to compensate consumers and create a three-member compliance committee. the issues for jpmorgan have been mounting and they've been costly. the bank has said legal issues could cost $6.8 billion above where the bank has budgeted for. the bank's cfo said earlier this month the bank would earmark $1.5 billion as more fines approach. it's the highest spend, guys, of any bank and it seems far from over. little wonder diamond issued a memo to employees telling them to brace for more action from washington and be confident of the resources the bank has pledged to pay for it. carl and kelly, back to you. >> interesting. same, s&p ups their rating on the stock to a strong buy, takes
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the dow is down 36 points. but it led to the degree it's up at all, is led by utx and boeing, two of the things that we were talking about as some of the exporters continue to get a lift out of a fed that will be supportive for a while, it appears. >> the s&p 500 is now in the red, too. it started out in the green a little earlier. carl, as you said, the dow is down about .25%. you know, there are a couple of things going on. we mentioned we heard from speaker boehner talking about the prospects of a government shutdown will hurt the economy. but we have the 10-year moving higher as well from overnight lows of about 2.67 to roughly in the area of 2.72. >> all on a day when the data was doing its part. the philly fed, best since march 2011. >> right. >> existing homes, the best
since august '07. ironic it comes the day after the fed said, you know what, the economy is too weak. >> it works that quickly. 24-hour monetary policy! >> the 18-houring lag. we'll see what the afternoon brings. let's get back to headquarters and scott wapner and "the halftime." all right. welcome to the "halftime show." four hours until the close. let's go to the wall and find out where we stand on this, the day after. here's what we're following on "the half." the dow is down 37. s&p is negative, as well. the nasdaq is barely positive. let's talk about what we're following on "the halftime" show, and taking stock. an ultimate stock picker is here with the top plays. is the price right after priceline hits $1,000 a share? where does it go from here? battles will do battle. first, the top story, what now? a big day after the fed shocker sent stocks to new highs, is the rally ser