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tv   Street Signs  CNBC  December 26, 2012 2:00pm-3:00pm EST

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cliff is now hitting consumer spending. the data point today that we got from one of the credit card companies is consumer discretionary is in negative territory and the "street signs" show will have more on this in about a minute's time. major question as the politicians begin to gather again, at least obama, tomorrow morning to try to get a solution. five days to go. >> bob did some interesting analysis or asked some good questions about that mastercard survey and it indicated that maybe that's not the be-all and end-all in terms of the consumer spending numbers but it does indicate that maybe this past holiday spending season wasn't all it was cracked up to be. that will do it for "power lunch" for the day after christmas. >> thank you very much for watching. "street signs" on cnbc begins right now. maybe we should call today's
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show "sleet signs." the weather wreaking havoc around america again. retail stocks melting down as the consumer finally caved in. a storm of another kind, the fiscal cliff, just days away but there's yet another threat out there which might even have a bigger impact on the economy. we'll tell you what it is. that story ahead. plus, herbalife decides the best defense is a good offense and why amazon and netflix are suddenly feuding like the hatfields and mccoys. >> hello, everybody. on the fourth last trading day of this year, it is worth looking at the tally year-to-date. the dow has gained about 7%. the s & p is up about 13%. the best still could be to come as since 1928, the s & p averaged its greatest gains in the last few days of the month. of course we now have to deal with the fiscal cliff. also, the nasdaq is the percentage winner with a gain of 15% this year. which, by the way, is exactly the same as australia's asx. >> two minutes into the show,
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already an australia reference. shameless. >> shameless. all right. could be a humbug christmas for retailers this year. the market today saying that things look a little more naughty than nice for many of the names. i want to look at the wall behind me because these are a bunch of red names, right? the bottom performers in the s & p 500 today, most of them are retail. look at that. coach, the single worst performer in the s & p 500 today. you've got ralph lauren, amazon, abercrombie & fitch, tiffany, the gap. fossil. urban outfitters. the limited. look at that. macy's on that name as well. many of the worst performers today are the retailers, perhaps on the back of that mastercard survey that we referenced earlier. by the way, though, as our long-lost friend herb greenberg might say, the biggest gaining retail stock today, yes, my friends, jcpenney. it is doing it right today. they are up a bit but still about 13 bucks a share below my
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bet price with herb greenberg. all mr. greenberg needs is a 66% gain in the next two and a half days to avoid taking me to dinner. back to you. >> i do believe that was a little bit of smug gloating, am i not wrong, brian sullivan? >> you're wrong. it wasn't a little. it was a lot of smug gloating. >> you take the shameless crown for today. let's get right to the trading floor. i'm down here at the new york stock exchange. bob pisani is down here at the new york stock exchange. we have rick santelli in chicago. bob, you have been trying all day to figure out a retail dilemma. have you figured it out yet? >> i think i have. it's been bugging me all day. we have mastercard saying retail sales up 0.7% for the holiday season. the national retail federation comes out and says their survey indicates it will be up 4.1%. i know it's different surveys but that's a big, big difference. it didn't make sense to me. i asked mastercard how exactly they're computing this survey and what they include and what they exclude.
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i think you ought to know these facts the company provided to me. number one, their mastercard survey includes the week of hurricane sandy which was the last week of october. some of these companies don't. secondly, the survey excludes nonholiday related categories, excludes food, excludes gas, excludes building materials. well, that's a very important piece of information. that may make up for the difference. mastercard's spokesman also told me, here's a quote, put the quote up, it is possible that total retail sales, that includes all the nondiscretionary sectors, could be up north of 3%. the broader view is up 4.5% in november. now, this makes some sense. their estimates including all of the sectors, not just some of them, is closer to the national retail federation number and i think that accounts for why the differences between the surveys are so large. >> the light bulb goes on. thank you very much. go and rest that voice of yours. we will check more on the retail situation later on in the
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show. in the meantime, rick santelli, how are things in the bond pits? >> you know, bob pisani sounds like a futures trader today. we hope he feels better. but the futures traders down here aren't hoarse at all. very little yelling. you know, it wouldn't be surprising to me to see a flat holiday shopping season if all i looked at, there are going to be a lot of bells going off here, if all i looked at was ten year note yields throughout 2012, i would make a case that things are kind of flat. yields haven't closed on their lows but they're still relatively low. they're not acting like they want to move up higher and at this point, even with the fed owning so many treasuries, a move higher will probably indicate some better prospects of economic developments ahead, not just the fact that we're obviously selling a lot of bell time down here in chicago. >> you are indeed. rick, thank you so much. meantime, the president is headed back to washington early, but congress still on christmas
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vacation which means we are no closer to solving the fiscal cliff yet. john harwood, five days to go, i am calm today. is this the calm before the storm? >> first of all, merry christmas, brian. >> merry christmas, john. >> it is possible that it's the calm before the storm if by storm, you mean a flurry of last minute deal making. a senate democratic leadership aide told me that there's still a 50/50 chance we will get a deal before january 1st, but that's the only optimistic voice i've heard today. a senior white house official told me that when i asked is there any signs of holiday progress, you know the president said go home, members of congress should go drink an eggnog and hang with their family and come back in a better mood. one word answer, no. no signs of progress and the republican leadership aide in the senate, mitch mcconnell is going to be crucial to a potential last minute breakthrough. we haven't heard anything from the democrats. so at this moment, we're at a
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stalemate but things can come together quickly if people start to get desperate and politicians start to worry that they will get blamed for a very adverse reaction in the markets and the economy generally. >> some people i've talked to today suggested the mere fact the president is coming back from hawaii early on suggests good tidings. >> well, i think it suggests the president wants to be working on this problem and be seen as working on this problem, but it's only partially up to him. he's got to get the acquiescence of republicans and a temporary extension of tax cuts for people under $250,000. their acquiescence to turn off the sequester to avoid the automatic budget cuts are up to mitch mcconnell in part and also up to john boehner who may be asked before it's over to put on the floor of the house a bill that lacks support of the majority of his own members. that is something that would be a risk on the speaker's part as he faces a re-election by the house of representatives to the
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speakership in early january, but we'll see whether if it comes to that, whether he's willing to do it. 8. >> john, thank you very much. as we edge ever closer to our impending fiscal doom, we will look more closely how the markets are reacting and what is yet to come. joining us now, michael farr in washington, and also peter schear. great to have you both with us. thanks for coming back from various holidays. michael, this is not an economic crisis. this is not a market crisis. this feels like a political crisis. do you blame our leaders for failing to get their act together over this? >> mandy, it is a profound failure of leadership once again from washington. i mean, we have been facing this profligate spending for a long time. over the last four years it's been $5 trillion more than we've brought in in receipts. just think about that in terms
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of your own household if you spent 11%, 12% more than you brought in in your annual receipts. it doesn't work long term. so we keep that up and we knew it was coming, and we don't really have the receipts so we do have to find balance somewhere, yet these guys go right up to the wire. john harwood has been reporting all day that they have to issue congress a 48-hour notice to return to washington. hasn't gone out yet. so while we're having a five-day countdown, it's probably closer to three days because we still have that 48-hour period we have to erode into. this political failure could turn into economic crisis depending on how severely these particular fiscal cliff and sequestration issues hit the markets. cbo says could be as much as negative 5% in gdp. >> that's quite a lot. peter, do you agree there could be financial or market armageddon or maybe not? maybe things will be okay?
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>> eventually it is going to be an armageddon but not because we go over the cliff, but because we avoid it. avoiding the cliff is the real problem, because it means that we delay paying for all this government. big government is very expensive. the fiscal cliff is part of the problem. we can't keep borrowing and the fed can't keep printing money. if we want government, we have to pay for it. that means we have to have higher taxes. i would rather see a much bigger fiscal cliff in the way of government spending cuts. that's what we really need. but if we're not going to do that, we're not going to cut spending, then the middle class has to brace for the bad news. they have to pay for all this government and the best way to do it is with taxes. unfortunately, taxes on the rich are not going to work. they are already overtaxed. it's the middle class that's going to have to pay more if we want all this government. >> do you think they can, peter, without destroying the economy? because the question i asked extensively last week is why is a couple hundred dollar tax rise to the middle class a doom now, but during the clinton era, it
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was praised? >> well, people don't have the home equity they had back then and they don't have the stock market wealth they had back then. >> costs have gone up. >> inflation, inflation has -- look at how much gas costs now compared to what it cost back then. food is a lot more expensive. look, the economy is buckling under the weight of all this government. no, i don't think americans can afford it. that's why we have to slash government spending. the nation is broke. >> but peter, peter, michael farr, while we need this reduction in spending and i'm totally with you, we don't need this ham-handed kind of blunt instrument approach to figuring out the solutions to these problems. i mean, these guys have had all the time in the world to come up with the simpson-bowles and they just refuse to take responsible action. >> but they're not going to do that. it's funny, people talk about we need a solution that avoids the fiscal cliff but that solves our long-term problems. these things are mutually exclusive. we can't solve our problems without going over a cliff.
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the problem is the cliff is too small to actually solve the problem. it needs to be much bigger. [ speaking simultaneously ] >> how much confidence would, let's say we go over the cliff and we cut spending, we raise taxes, and the fiscal situation, albeit through a short recession, helps the fiscal long-term situation of america. how much confidence could that add to many people out there that are worried about the long-term health of this country? >> i mean, you're talking about valhalla. that's the roseiest, most fabulous of all scenarios if, in fact, we could get to that. you know, you have to remember, i sit here in washington, d.c. and of course, the line of course on "squawk box" this morning was lawmakers are much more inclined to say i was there to lower your taxes and i didn't vote to raise your taxes.
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as simplistic as that is, i think it's true so i think they let us go over and then cut the taxes and they undo all the good the cliff could actually do. >> but there's no real spending cuts. that's part of the problem. it's all talk. there's no real cuts in the cliff. >> you guys sound like congress. keep on arguing behind the scenes. enjoy yourselves. thank you so much, michael. peter, you're sticking around. meantime, the fiscal cliff may be a big deal but there is another threat out there which might be in the short term more risky. the container cliff. businesses up and down the eastern seaboard are bracing for a massive port showdown as unions threaten to strike and possibly shut down most imports and exports out of this country. let's add in cnbc contributor jimmy peeb. we focus so much on the fiscal cliff. if we shut down 14 or 15 of the biggest ports in america, that could do much more harm than any
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fiscal escarpment. >> it could do much more harm more quickly. the fiscal cliff on january 1st, the economy's not going to collapse. but the shutdown of these ports, you had $200 billion or $300 billion a year coming into this country through these ports. what i think interesting, the last time we saw an east coast longshoreman strike, port shutdown, was in 1977. a decade which i remember where nothing went right. nothing worked. right now, to me, not much is working so it only stands to reason that we get a strike like this at the worst possible time. >> is it even justified? peter, let me quote something from the "new york post" saying the strike is not about jobs, not about safety. essentially, what it is about is protecting big labor's archaic work practices and corrupt waterfront rackets. nerd, in other words, we are being held hostage to something that's not justified. >> that's labor unions. the bigger problem is there's
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all this inbound traffic. all the containers are leaving empty. eventually it's going to be -- when we have a dollar crisis, no one's going to ship anything to america because we aren't going to be able to afford to buy it. in the meantime, if we increase the price of unloading all this merchandise on american ports, it just means that americans are going to have to pay more money for all the products we import. all the shipping costs are going to go up. >> these container royalties remind you on your telephone bill, there's still this excise tax from the spanish-american war. the container royalties were put in the 1960s, they're still there and they only want a cap on them. this is what the strike's about. >> what do we do? >> we got to get rid of these unions. >> then what? [ speaking simultaneously ] >> shut down the ports for months? it's not like air traffic controllers strike. >> actually might help us because we're borrowing money to import all this stuff. one of the best things that can happen is we couldn't consume for awhile.
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if all the stuff we're buying on credit couldn't come to america, we actually might have to make stuff ourselves which would be very problematic but we have to do that. you were reporting earlier about the fact that consumers aren't spending as much. that's what they have to do. they're broke. they have to start saving. >> real quick, how likely is this strike? they're threatening. is it going to happen? >> the president has the option of putting in a cooling-off period for basically about 80 days. my guess, given the fragileity of the economy, he will probably do it. that doesn't solve the problem. we're just kicking the can down the road. tell me if that doesn't sound familiar. >> kicking the canister down the port is more likely. thank you very much. peter, thank you as well. netflix calling out amazon.com after the movie's streaming service has a major outage on christmas eve. we will give you details on this brewing battle royale. plus, why the fiscal cliff is scaring some people into returning their christmas gifts. and dangerous winter weather in much of the country.
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with more on the way. we will give you a live update on the storms and their potential economic impact. [ male announcer ] it's that time of year again. time for citi price rewind. because your daughter really wants that pink castle thing. and you really don't want to pay more than you have to. only citi price rewind automatically searches for the lowest price. and if it finds one, you get refunded the difference. just use your citi card and register your purchase online. have a super sparkly day! ok. [ male announcer ] now all you need is a magic carriage. citi price rewind. start saving at citi.com/pricerewind. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work
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welcome back. it is december 26th, aka winter. the old man is socking much of the midwest and northeast with a storm. thousands of flights have been
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canceled. another frustrating wrench in the already frustrating christmas return travel season. a number of cancellations expected to climb as the storm makes its way up the northeast to philadelphia, new york and boston. that hasn't been stopping the airline stocks, though. look at this. the airline index at a one and a half year high. >> some of the airlines really ripping it. the weather of course is keeping millions of people in their homes and away from the malls on one of the busiest retail days of the year. we are joined from philadelphia, with a look at the economic impact of this and of course, of other storms as well. great to have you with us, paul. we have been hearing a lot about the fact that this shopping season has been sluggish, even before christmas there were lots of stores that had 50%, 60% off. would you put this mainly down to the fiscal cliff worries, to the aftermath of hurricane sandy, or to weather? >> i think all of the above. i think the fact that we have this sort of fiscal cliff overhang is sort of pulling back
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people from spending money but i think the weather has a huge impact on it and i think one of the big things to look at is the comparison to last year. last year there was no weather. it was abnormally warm, one of the warmest decembers on record. we had very, very strong traffic levels. any time we have weather this year, there will be a head wind and when we have the kind of weather we're seeing today, that will be a significant head wind. i think the fact that mastercard and sharper track pulled back their numbers doesn't bode well for the rest of the year because now of course we're up against it and we're looking at some really significant weather on a big shopping day today and then also tomorrow. >> does that show up in better numbers for online retail? >> i think in principle, yes. i think there will be more people actually shopping today online than there would be going into the stores. the fact that we've got this snow threat actually occurring today in new york and philadelphia is going to keep people at home. i think the fact that this weekend, we're going to have some weather although not as bad as this, also might impact that. overall, the weather is sort of
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a net headwind in terms of people getting into the store and the fact that the weather was so good last year, a little bit of weather on a weekend is going to shave off expectations in terms of actual sales for the brick and mortar retailers. >> paul, the retailers were whining and moaning and groaning they weren't selling winter coats and salt because it wasn't cold enough. now we got a storm and they appear to be groaning because they will sell winter coats and salt. >> definitely there are product categories that didn't sell well last year, will definitely make money, they will sell those. but at net, the bigger impact on retail is traffic. the fact that you've got a big day, today is like a top ten shopping day, and you've got abnormally cold weather and snow and ice, is a bigger negative than the positive of selling coats and jackets and things like that. >> paul, thank you very much. see you. be safe. >> all right. herbalife hires a strategic advisor and a law firm.
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is the best defense a good offense? we will talk about the stock's chances of a recovery. jane wells drawing the short straw at the one place that i would not want to be today. >> reporter: well, you know, i'm glad i got here at 4:00 a.m. because i was able to find a parking space. we have been talking to all these analysts. up next, we actually talk theo couple shoppers. what are they buying and returning? does the fiscal cliff even matter? over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insue q usaa. we know what it means to serve.
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you thought the malls were crazy this past weekend. well, it is utter mall madness today and out there where there is madness, there must be jane wells as well. you are out there with all the shoppers in l.a. jane? >> reporter: mandy, i'm here at the grove in los angeles which is really starting to get crowded. it just opened a little while ago. why are people here today? some are returning items, some are shopping for new items. some are both. here are a couple of examples. liquidity services says returns will be up 37% this year so kelly riley and her daughters are here doing returns but not just because the sizes are wrong. glenn morgan is also making
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returns but he's shopping for new stuff like he does every december 26th. two shoppers, two strategies, one concern about the economy. >> we are returning to gap and j. crew this morning. >> reporter: why? >> wrong sizes and quite frankly, i overshopped. >> reporter: are these returns or new purchases? >> bahama's a return because unfortunately my mom bought me the same shirt for my birthday. >> reporter: did you break your budget? >> absolutely broke my budget. and didn't realize it until christmas morning. >> it is a tradition that we save a chunk of money for this day specifically. >> reporter: is the economy on your mind in all this? >> yes. constantly. >> being that this was an election year, i was very concerned how the economics would shape up as we move forward. so we are being a little more conservative and watching how spending goes and so far, i'm not too thrilled with the way it's going. >> reporter: of all the people we spoke to this morning, only
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one person said he was not concerned about the fiscal cliff. he thought it was a bunch of hype. this was really interesting, brian. i only talked to about a dozen people so it's not scientific, but not one of them, i had all age groups, not one was here using a gift card or had gotten a gift card. now, again, maybe the early shoppers aren't doing gift cards but i found that interesting. >> let's do our own unscientific study right now. between mandy and yourself, very quickly, i haven't bought gift cards in about two years because i found they're sort of boring gifts. you feel like you haven't put any thought into it. i moved away from them. >> it's a lazy gift. it is totally a lazy gift. >> reporter: no. you guys, you guys don't know. my kids are 20 and 22. that's all they want. don't buy me clothes, mom. i just want money. just give me the gift card. it's a generational thing. >> so give them cash. >> yeah. even better. >> reporter: i can give them cash but it's a little safer, maybe, to carry a card around, maybe. maybe not. >> i don't know.
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i still like actually getting something rather than a gift card. anyway, good stuff. thanks so much, jane. we've got pretty promising home sales data out today but will that carry over into 2013? housing predictions for the new year are still ahead. first, the growing knock-down, drag outage between amazon and netflix. which movies raked in the christmas day cash at the box office? we will sing our way through another "street signs" segment. when you have diabetes... your doctor will say get smart about your weight. that's why there's glucerna hunger smart shakes. they have carb steady, with carbs that digest slowly
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all right. street talk time with maendy downtown. this is the rapid fire street talk. let us do it. soaring on positive comments from the ceo japanese firm daiwa. a big rally in japanese stocks due to aggressive push from the new premier.
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he thinks they could have a 30% run in japanese stocks in 2013. he's a big proponent of fiscal expansion, i.e., the huge japanese printing press. nomura up more than 6%. continuing with japanese related news. bristol myers and pfizer, mixed trade for these names even with an approval in japan. japanese regulators approved anti-clotting drug developed called eloquist. it is the third approval for the drug in less than two months. the u.s. fda considering it. their decision expected by st. patrick's day of 2013. infinity farm amended a licensing agreement involving enzymes that could help fight against cancer. rbc likes it. they raised their price target to 38 from 32. this company also recently sold stock which rbc adds could help
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shore up their capital position. finally, best buy. best buy shares not moving higher today. in fact, down a percent. but you had positive comments i want to relay to you about the new store remodels. an analyst went to best buy post- and pre-model and says the new stores are a real up grade from the whole. he believes the new design could help sales. best buy down about 33% this quarter. in bonus stock which is not a stock at all, it is an etf, talking about the uso, i'm only showing it to you because it's up 2.7%. it is very active and you got some technical levels looking pretty good, mandy. >> actually, that oil etf is a pretty good segue into the oil check because the president's early return to washington sparking an oil rally.
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bertha coombs has been keeping her eye on that. >> reporter: we had a nice technical rally if you are long oil futures here. take a look. the final trade coming in at around 91. we will see where we settle but it's looking like the highest settle since october 18th sparked by that encouragement that the president was returning early and congressional leaders would be returning early, even as equities faded, we did see a technical rally moving to the upside. we got some support today because we do have options expiring so that provides a little volatility and also with low volumes, you do get more of a push either way. when you have fewer participants. what's interesting is that today, we had the management group outperforming the rest of the complex but year to date, it is negative even as brent crude has actually seen a 3% rally. the last time we saw the two of
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them diverge was 25 years ago. this past month we have seen wpi come up as people anticipate the pipeline expanding in the first quarter of next year. back to you. meantime, a fight is brewing over energy exports with the obama administration releasing a report saying that natural gas exports would help economic growth but democrat ron wyden is calling for restraint saying he's been hearing a lot of opposition in the last few days. wyden is set to become chairman of the senate energy and natural resources committee next month. opponents believe the unchecked exports would threaten jobs and exports in manufacturing. in the meantime, the low cost of gas here brings a plan to build a north american facility just to ship it back to europe. the "wall street journal" reports the company will build the $659 million plant in the u.s. or canada and the facility will huge natural gas to produce
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iron which will be sent back to europe to be processed into steel. meantime, the nasdaq falling today but get this, shares of research in motion, yes, r.i.m., bucking the trend. seema mody with us now. this is not a typo, is it? >> not a typo. take a look at shares of research in motion. as you point out, best performing stock on the nasdaq 100, quite a sharp rebound when you take a look at shares in comparison to last friday, when the stock dipped lower by around 20%. of course, many traders calling this a relief rally when you have a lot of traders covering their shorts. there is also some blogs out there leaking pictures of what they say is the newest blackberry 10 of course. research in motion saying their blackberry 10 is slated to be released january 30th of next year. another bright spot, netflix. not the move you would expect. some customers were impacted by a service outage on christmas eve. it has been fully restored. we are seeing shares higher on the day.
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retail stocks getting hit. lot of the specialty retailers moving lower on that mastercard spending pulse report that showed holiday sales coming in lower than expected. so those are some of the names to watch. of course, also, online sales which grew only 8.4% from october 28th through saturday which is lower from the online sales growth of 15% to 17% seen in the prior 18-month period. that also weighing on some of those online players, including amazon and ebay. back over to you. >> thanks very much, seema. early christmas box office results are in and it looks like yesterday was a really big one. let's bring in hollywood.com's paul. before we get to the box office numbers, i want to ask you real quick about the netflix outage on christmas eve. how much could that have pushed people to the box offices and helped movie theaters? >> it might have inadvertently helped the box office. we had a huge day on christmas day and i think that may have been fueled in part by people being put off by this outage on netflix.
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"les miserables" opened with $18 million, the second biggest christmas day opening ever. "django unchained" $15 million, third biggest christmas day opener ever. the business earned about $73 million overall on christmas day. christmas eve, you had the outage on netflix. people may have been put off by that and that may have pushed them into theaters. >> i'm doing a quick rule of thumb here. i'm just thinking about all the amazing smashes we've had this year like "the hunger games," "the avengers." has this been a record year for studios? >> yeah, we're coming up on $10.8 billion for the year. this will be an all time record in terms of revenues. we are up 6% over last year on the revenues and 6% ahead on attendance. this is pretty amazing considering the amount of alternatives that people have in terms of their entertainment
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options both with the internet obviously, pdas, tablet devices, all these other ways to get movies, and yet people still love going to the movie theater. you mentioned "the hunger games," "the avengers" biggest opening weekend of all time in early may with $207.4 million. it's been great for me because i get to talk about all this stuff. it's all been very positive, particularly at the end of the year when we'll have this big record, christmas day was the cherry on top, the icing on the cake, whatever you want to call it. santa's happy, the industry's happy and it's a good year for hollywood. >> you have such a hard job having to do all that movie research. a real quick question. 2013, will it be able to top 2012? >> absolutely. i think we will see for the first time $11 billion at the box office. you got the next "iron man" movie, the next "thor," you have "the hunger games" and "the hobbit." on paper, 2013 looks like, i have been saying this for years,
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we will hit $11 billion. finally i might be right and we will do it in 2013. great lineup. >> i love the movies. for anyone who has seen "les mis" take the tissue box. you will sob your little heart out. thank you so much. brian? well, what does the looming fiscal cliff have to do with hollywood gossip columns? it appears to be the reason that ashton kutcher is suddenly trying to speed up his divorce from demi moore. couple announced their split more than a year ago but have been trying to work out a deal. now he has filed divorce papers and wants it done by the end of the year, reportedly for tax reasons. he is tv's highest paid actor and has also invested in a number of startups. he's a rich guy. the fiscal cliff affects even him. thank you. financials have been on fire for most of 2012 but low interest rates and pretty tough regulation, those factors are still putting some profit margins under pressure. we take a look at what is in store for wall street in 2013.
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>> reporter: after a year's long identity crisis, 2013 will see a spate of bank makeovers. barclays will spin off its investment bank, bank of america will review options for merrill lynch. behind these walls, citigroup's ininvestment bank will shrink considerably, focusing on top traders and deal makers. if that deal market returns as well as valuations, citi could sell all of its crisis-tinged bad bank citi holdings. about that london whale at jpmorgan, it forced jamie dimon to clear house, a dozen executives changing roles. expect a lot of face time with media and investors for mike cavanaugh, co-ceo of the investment bank and the not so dark horse to succeed dimon. battles will brew over regulation, the consumer financial protection bureau will crack down on overdraft fees, a big chunk of bank revenues. with the help of the fed, two
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key facets of dodd-frank will reach the finish line. the voelker rule will be completed by midyear as will the regulation of the trillion dollar derivatives industry. if either of these hurts competition abroad, expect banks to sue. all right. the housing recovery rolls on but will 2013 be a bigger boom or a bigger bust? truly a chief economist will join us with his predictions next. plus, china's newest train cuts a 20-hour trip to less than half that time. just how speedy is it? the answer for you later on on "street signs." [ male announcer ] this december, remember --
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we're grateful to be a part of it. coming up on "closing bell" five days until we fall off the so-called fiscal cliff. can lawmakers get their act together in the meantime? we will hear from former vermont governor howard dean, former white house economist, jared bernstein and a host of others who will weigh in. don't look now but obama care taxes may just be getting started. will congress take aim at employer-sponsored health insurance? we will look at that and aetna's ceo will weigh in. it's getting messy with this
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storm making its way across the country. now it's on the east coast. we have the latest on the nor'easter and how it could affect your money. mandy is kind of to stick around, stay late for us. she'll be with me at the top of the hour. see you guys then. >> you twisted my arm. meantime, some signs of life in the housing market. the s & p home price index rose 4.3% year over year, the biggest increase in two and a half years. the index was down .1% month over month but that is likely seasonal so let's ignore it. all in all, no doubt housing making a big recovery in much of america. what can we expect from the housing market in 2013 is the question. we've got the chief economist with good news but also a couple of warnings. i really don't like to start on bad news. give us the good news first. >> thanks, mandy. here's the good news for next year. first of all, we're expecting to
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see prices continue to rise. we're also almost certainly going to see more construction and more sales than we have in this past year but remember, we're still a long way from normal so construction sales will improve but we still won't be back to normal levels even by the end of next year. >> what do you mean by a long way to normal? i think you said we're, what, 51% back to a normal housing market. this time last year we were 28% back to a normal housing market. this time next year, will it be 100%? >> it won't be 100% next year. by this time next year we might be maybe two-thirds of the way back to normal, maybe a little better than that. but of course depending on what happens with the fiscal cliff, all bets are off. >> all right, jed, give us -- we're asking everybody for predictions for 2013. we know how you feel about the year in general but give us some wild cards. this is your time to let your hair down and be crazy. >> all right. >> let it down! >> i will take all that hair i have and let it down. the first thing is whether we are going to see more inventory
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next year. the tight inventory that we see is holding back sales in many parts of the country including the west. but if prices rise enough next year, we will see even more construction and we will start to see some of the underwater homeowners get back above water and put their homes on the market. we might actually see inventory turn around next year. that would be a big change from what we've seen. >> what about operation twist? in your professional opinion, how much has that really mattered if at all to the housing turn? >> so it has helped lower -- so the fed policy has helped lower mortgage rates and that's made housing affordability incredible relative to renting, but that's likely to turn around next year. prices are now rising faster than rents in a lot of the biggest markets, and if anything, mortgage rates should be a little bit higher by the end of next year than they are right now. that means houses won't be as affordable. >> do you think that buying a house, is buying still a good investment? >> right now, buying is roughly
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45% cheaper than renting. so if you have enough for a down payment and can qualify for a mortgage, owning is now a lot cheaper than renting. one wild card for next year, of course, is what happens with the mortgage interest deduction. now, even if the mortgage interest deduction went away, buying would still be cheaper than renting, but it could cost a typical mortgage holder a couple thousand dollars more a month if the deduction went completely away. >> thank you very much, sir. have a happy new year. i'll let my ears down next year. >> happy holidays to you both. thank you. >> i don't know what i'm going to let down. herbalife is taking a pounding, right? >> yes, it has. but now it is fighting back. pounding, brian. >> yes, it has, but now it's fighting back. what the supplement-maker is doing to try to save itself and the stock coming up.
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welcome back to "street signs." marvel technology down on news of a legal setback for the firm. basically carnegie-mellon university has won a patent case against marvell technology, the jury awarding a $1.7 billion
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verdict that marvell has to pay carnegie-mellon over an obscure audio technology, two patents that carnegie-mellon had so its stocks are responding in kind. as you can see, it's down 4.25%. the jury requiring that marvell technology pay carnegie-mellon university $1.7 billion. brian, back to you. >> big jury. all right. thank you very much, mary thompson. that is a big number. meantime, herbalife clearly following the adage that the best defense is a good offense and it's firing back at bill ackman and other critics making a number of big moves over the past few days. the stocks actually up today after they hired investment banking firm, a law firm, a stock buyback plan, all in just a couple of weeks. coming up in the "wall street journal," steven rusalillo has been following the story and has the latest now. this is a company keeping you very busy. >> absolutely.
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what's interesting about this is herbalife is clearly not taking this situation lightly. as you describe, they have hired their -- they are working with a law firm, hired a strategic adviser. they are actions sell rating their stock buyback and all of this ahead of their january 10th investor and analyst meeting, and so that day is going to be the key date for this company where they are basically going to come out and say you want to know something, the short sellers are wrong, and this is why we have a sustainable business and here's why. that's a big day for this company and a big day that a lot of people are looking towards. you've had some really high-profile hedge fund managers come out over the last week or two and basically tear apart this company. you had bill ackman come out last week. you had whitney tilson say today, yes, i'm shorting the stock also and ackman's analysis was some of the best research he said he'd seen in years. herbalife is not taking this situation lightly, and they are really doing all they can here to try to instill some sort of
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investor confidence within -- within the investor community, but, you know, whether that happens obviously remains to be seen. >> 342 slides will do that to you, steven. i can get the investment banking and i can understand the buyback and the analyst day. trying to get my head around the hiring of david boies' law firm. >> it's unclear what is going to come from that relationship, but i think one thing and the grand takeaway is herbalife is pulling out all the stops here to try to instill confidence, that the stock slide here has gone too far too fast and that they are a sustainable business model. analysts have come out in defense of herbalife and say, you know something, the company has reported better than expected earnings and revenue over the last few quarters and the stock has been hit by these short sellers. one analyst has come out and discontinued coverage, dropped coverage of the company saying we can't really rate this right
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now because the short sellers are attacking it. >> one, two, three, four, five, six, seven, eight. >> mandy counting. she's getting set for "closing bell." boies, you'll remember, was involved with an amway case, right. herbalife and amway, not exacts same company, but he's familiar with the way the companies operate in a general level. do you think that maybe there's just your professional part of it, maybe trying to make ackman a little bit scared? >> you know, that certainly is a possibility, and i wouldn't put that past anyone. you know, as i said, it still remains a little bit unclear as to exactly what the real, real motive is for hiring this firm, but you can certainly make that argument and put those two together, but i think, that you know, the big takeaway here is this stock has had a huge, huge drop and, you know, some people are coming out now and saying the stock has gone too far too fast and maybe it's due for a run-up. time will tell and we'll see. i don't know. kind of hard to bet against bill
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ackman at this point. >> thank you for your time. up next, really fast trains in china. we've decided to great year in the gulf, put aside our rivalry. 'cause all our states are great. and now is when the gulf gets even better. the beaches and waters couldn't be more beautiful. take a boat ride or just lay in the sun. enjoy the wildlife and natural beauty. and don't forget our amazing seafood. so come to the gulf, you'll have a great time. especially in alabama. you mean mississippi. that's florida. say louisiana or there's no dessert. brought to you by bp and all of us who call the gulf home. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote.
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