tv Squawk Box CNBC December 17, 2013 6:00am-9:01am EST
not so, according to research. it's december 17th, 2013, as "squawk box" begins right now. >> i really can't say. >> baby, it's cold outside. >> i've got to go away. >> but baby, it's cold outside. >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we start things out this morning with the fed and the markets. the policymakers are going to be gathering this morning for the start of a two-day fomc meeting. there is an interest rate decision and an announcement set for tomorrow afternoon. and then chairman ben bernanke is going to hold a news conference. ahead of the meeting, there have been no shortage of taper speculation. aig's ceo on "squawk box" yesterday. >> well, we've been calling around and nobody will tell us over at the fed. no, i'm kidding. our very is very simple. that we see that the economy continues to be stronger than people think. we're not expanding as much as we should. that doesn't mean there's a weakness in it. i think there's a fear. i go around, my fellow ceos,
people frightened about how much you want to invest in the united states at this time based upon regulatory requirements and so on. the other is banks are concerned about lending. you get anywhere near a risky loan and they get in trouble, so why bother? >> we're going to talk more about expectations. then at the top of the next hour, steve liesman will join us with the exclusive cnbc survey. as for the markets, stocks rallied to start the week. the dow and the s&p are down -- a rlths more than 1% -- actually, they're only off by about 1% from the record closes. you're looking at dow industrials there. 15,884. the futures this morning are indicating not much movement. the dow futures are up by 13 points. s&p up 0.5%. nasdaq up by less than a point, as well. we're paying close attention to treasury yields in advance of a fed decision. the ten-year note is yielding 2.782%. as the yield came down, that is
what gave stocks to breathe and room to run a little bit yesterday. we'll be watching that closely. among our special market guests this morning, well known newsletter writer jim grant, paul isaac of arbiter partners and the firm's flagship fund is said to be up 30% this year, so we have a full morning of market discussions. first, andrew has the top headlines. the first one i don't know how i feel about. facebook is expected to start selling video ads later this week. that's not what bothers me. the journal says the company plans to make that announcement today. but get this part. the ads will play automatically in users news feeds. so you're going to go to facebook and a video is going to play. i don't know if we're all going to like that or not. boeing raising its dividend by 50%. the board approving a new $10 billion share buyback. the company says the buyback will occur over the next two to three years. and get your boxing gloves on.
another round of the herbalife battle playing out yesterday. the company announced a new audit yielded no changes to its financial statements. shares jumped on that news, of course, in a blow to hemg fund manager bill ackman who has been betting against that stock. but he is not backing down. in a statement late yesterday, ackman argues it's not the role of herbalife's auditor toes determine if it's a pyramid scheme. he once against predicts that it will be shut down by regulators. of course, it has not yet. a different take from carl icahn, talking to scott wapner on cnbc yesterday. >> i never really doubted that this is a viable company. you know, i guess i was one of the few people that bothered to read that report a year ago when they made so much of it. and when you read the report, if you bothered to read it, it was, i believe, nonsense then and i think all these criticisms are
pretty much nonsense to begin with. you know, the statements got about certain people the statement offered rolling, never in doubt. and i think the case of herbalife and ackman, that step is the quintessential statement of that. >> you can have all the respect in the world you have for bill ackman, and i do, but at what point do us you have to hang it up, you can't keep this going? is it unfair to keep saying it's a pyramid scheme? is it really a pyramid scheme? >> that's the question. we don't know. >> no, but it's been a year. i think it's been now -- i don't know if it's been a year or more than a year. no regulators have come out and said we have a problem. right? i mean, it's just -- >> i used to fly over that building, you know, 25 years ago flying into l.a. the herbalife building is green with a leaf on the thing. i don't know.
it's a long time for the pyramid scheme to, you know, not -- >> but do you fight it for years and years and years? >> doesn't -- if it's something like that, doesn't the accounting finally sort of implode on itself?life. erral i've. >> sooner of later, you can't get the loans and it all collapses. ackman has been right on some of that stuff. it's like the facebook story. that will not affect me. i like the herbalife candy bars. i wish they would send me some more. >> i guess the question is how long can he stay in? >> how long can you publicly be -- i mean, look, david einhorn was out there for many, many years. and he wrote a book about it. maybe you can hang out. but it's a tough sledding.
and you're -- >> look, i think his greatest hope is that a regulator would get involved and go in and look a it. but if a regulator doesn't get involved, you know, who knows? this is something that -- and there's no definitive solution out there. >> somebody out there, the consumer out there is like using herbalife, i'd like to hear from them. could we find someone that uses it all the time and pays a lot of money for the powder? >> if you're an herbalife user, send aus tweet. >> i like their candy bars. did you have one of those? >> i don't think i ever tried the candy bar. i tried the protein shake. >> you did? >> i wasn't so bad. >> i guess -- i don't know. i saw this yesterday and i -- you know, we got icahn again, great. so i don't know. maybe i'm sick and in a bad mood. but i didn't really care that much. >> well, my question is, if he
stays in this, does ackman stay in this for the long haul or is it going to be like where he turns around and sells the stake? >> what is the market cap? it's all the way up to -- i think it was 75 yesterday i saw. >> yeah. 6.9. >> that's a lot of money, a lot of dough. in other news this morning, glaxosmithkline is going to stop paying doctors to promote its products. the company will end linking compensation for its sales representatives to the number of prescriptions the doctors write and stop payment to health care professionals for attending some of these medical conferences. the announcement comes amid criticism of aggressive industry sales tactics. in washington today -- >> i think that's a great -- >> you do? >> don't you think? >> i do. you know, i like -- i like
companies to be able to do what they -- >> and they will probably try and force the other drug companies to follow suit. the regulators are not telling them to do it. they're doing it on their own, i understand. >> you don't want demand push for a lot of pharmaceuticals. it's like, i've got something wrong with me. the drug will help what i have wrong. therefore, i come to you, please give me that drug. it's not like we got the drugs, we're going to -- all you people need them. it's a push, it's a demand push. it would be better to be a demand pull. >> i applaud this as a patient. >> i like watching nightly news where it's about ten seconds of what it does for you and then like two full minutes of i watch in horror at what could happen to me if i ever ingest one of these pills by accident or something. you know? >> you should thank the regulators for those extra two minutes. >> for me, there can't be enough regulation. i'm like you. there can't be enough
regulation. in washington today, president obama is going to meet executives from leading tech companies to discuss ways to improve the health care website. healthcare.g healthcare.gov. the meeting is going to include executives such as apple's tim cook, twitter's activity costolo, eric schmidt, cheryl sandburg. comcast's brian roberts and at&t's stephenson. the meeting will discuss issues having to do with the nsa surveillance program and the impact on technology companies that comes a day after a federal judge said that the program almost certainly violates the law. it's weird. >> the judiciary is weird. and it's funny the way one judge can see one thing and one judge can see -- and to interpret the law, it's -- you would think it would be objective, but it's not
very subjective. that's why very activist judges are the ones that worry me and scare me. and that's why we have a system of higher and higher appeals. hopefully the best ones are at the very top. >> that's what this does, basically pushes this to the supreme court, stops that process so the supreme court can weigh in on what's happening. >> it's pretty neat the way we do it. people complain about appointments getting held up and things. but there's a lot of due diligence done. when you get into a place where it really matters what you decide, hopefully your opinions and how you feel like -- you see how this splits people, the nsa. there's people that hero versus someone who -- so if you have a judge that isn't objectively viewing it, but that comes down on one of those two sides, it's bad for him to be able to say yes or no that it's the law or not. >> it's a lifetime -- too. >> so it's -- and then you have to get -- you can't just be appointed most of the time. you have to be confirmed.
i know you want -- what did you want? you wanted this guy, edwards for the man of the year, you want him the guest host -- >> i would have him as the guest host. >> you wouldn't want to at least ask him -- >> he's from -- >> he turned into sort of this -- >> i wanted to -- >> seriousry, there are people that think he should be canonized. it could be nothing more than just like a little snitch, sort of, right? >> i'm arguing that he -- >> do you think he's this really moral character? >> no, no. >> there was a push yesterday to see would he get clemency if he would stop doing leaks and the obama administration said no way. >> and by saying that, this proves that what i did was a patriotic thing to do. and i'm just hoping the judge isn't as opinionated as me on things. >> talking about opinionated judges, did you see the judge reycoff article? >> i didn't see that. >> judge reycoff, who is
supposed to be an objective judge involved in a lot of on these financial cases writes this -- >> why hasn't anyone gotten a deal? >> writes this article in the new york book review and basically says, why has nobody gone to jail? >> and he said maybe there wasn't any fraud committed and he rolled his eyes and said yeah, right. >> and the prosecutors aren't on doing their jobs. >> this is what i'm talking about. >> he's not going to allow plea bargains any more where the companies say they didn't do anything wrong and pay a fine. he wants people and companies to -- >> so he's been somewhat activist, but to be out there publicly, this article almost tried to shame the prosecutors into prosecuting. which is -- it's interesting. if you're the judge -- >> there are people on both sides that think someone should have been in jail and then there's people on the other side that say, you know, if you're working within flawed laws and regulatory rules, and you're working within it, then you're supposed to maximize what
your -- so many things went into that. and now the narrative that we hear now in hindsight is so different than when you're actually there. you weren't there for the meeting. they had an off the record meeting. at the time, it wasn't nearly as clear that the whole thing was ready to immediately, like, burst. and people were still talking about how small subprime was. people were still -- >> andrew knows that. >> right. people were still begging for long mortgage product. it wasn't nearly as obviously. >> i don't agree with you at all. >> judges, lawyers. >> would you ever want to be a judge? >> yeah, that would be great. >> in the miss america pageant, maybe. that kind of judge? >> no, that's too much responsibility. i wouldn't want to do that, either. let's go back to washington on clip capitol hill. budget legislation is gaining momentum in the senate. republican senators orren hatch, johnny isaacson, chambliss all
say they will vote to send the measure over the critical hurdle. in other d.c. news, senate majority leader harry reid is pledging to keep the senate in session until christmas. politico reports the main desire is to approve nominees because the nominees hit the reset button when a new session convene necessary january. if they don't get it done before christmas, they basically have to start from scratch. now it is time for the global markets report. we're going to head over to london to see our good friend, ross westgate, who is standing by. ross. >> good morning, andrew. good to see you. after the gains yesterday, a little softer today for european equity markets. decliners outpacing advancers by around about six to three. the ftse yesterday was up some 82 points after being down the previous week. so today we're down 23 points. not big losses, just down 0.3%
at the moment. along with the xetra dax. we had the latest print of inflation today out of the uk. came in weaker. the annual rate of cpi, 2.1%. but inflation hasn't been a real issue with the bank of england. the economy is doing better. they have revised up their growth forecast as we know. and there is a sense that the market doesn't necessarily believe their forward guidance at the moment. but still, not too bad. it may take some pressure over household incomes that have been strapped a little bit on the cost of living crisis. the cac 40 is do you know 0.8%. the ftse mib is currently off 0.3%. let's break that down into sectors for you. yesterday, there were no sectors that were down. today, there are only three that are up. also the travel measure is fairly light. down side reresources for once doing better. but only just by a little bit. construction and materials, oil and gas, banks are weaker, as well. banks are very much in focused. we're focused on comments from
mario draghi who has come out and basically said, look, at the moment, the single resolution mechanism as proposed from last week's meeting doesn't cut the mustard because it's too complex and it is still a collection of national funds to bail them out. we have got another euro group meeting this week where they will try and hammer that out. don't hold your breath. there may still be one around christmastime, as well. that's where we stand in europe. back to you. >> hey, ross, do your judges still ware those wigs? >> yes, they do. in our courts, they still do wear the wigs, yes. >> you guys never change anything, right? if it worked for you, you think that's -- you know, you've got a lot of history and, you know, the british empire, all that stuff, trying to cling to the last vestiges of that. >> there has been a -- there has been a debate, joe, about whether they should change that, when they go into court they
should not be wearing wigs for some of the reasons you're saying. i'm not quite sure where we are with that discussion. but it has been under discussion. >> we stopped in like the 18th century, i think. >> yeah. >> some of us. what is the point? >> i don't know is the answer. i'm not quite sure what the point is. but they still wear the stiff collars, the wil wigs, the sort of gowns that go with it, as well. so it's -- what is the point? i don't know. it's tradition. >> people -- like i say, people tweet that to me, what's the point? they think i wear one. anyway, coming up, ross, at least 40% of americans start off the day with a multi vitamin. this was all over the news last night. but we're going to talk about our take on it, i guess, because people know about it. but new research could change that. how does this affect vitaminmakers, gnc, these companies that sort of -- talk
about demand push. that story next. first, though, squawk sports news. the baltimore ravens still have control of the final anc wild card burst after 18-16, this beat the lions. justin tucker his six field goals. he was -- go ahead including a go ahead, a 61 yarder with 68 seconds left. the lions dropped to 7-7, one game behind chicago. now to the national weather forecast and reynolds wolf, snow again headed to wall street, right, reynolds? >> you're absolutely right about that. today we could see in some spots, anywhere from 2 to 4, maybe as much as 5 inches in some spots. all compliments of this winter storm. although it's going to mean for snowfall for parts of new york, you make your way south to the nation's capital, kind of a wintry mix. your rain, your sleet, your snow. the question is, how is this going to affect your travel?
well, it depends on where you happen to be. if you look at this map, it's going to pop up any second now, you could see some delays in a few spots. chicago, backups. cleveland, new york, boston delays are possible. folks, be patient. for more on "squawk box," we have more coming up in just a few moments.
executive edge, our daily segment focused on giving business leaders a leg up. if a multi vitamin is part of your morning routine, you are certainly not alone. but new clinical trials have found the supplements don't ward off chronic disease. researchers say at best the vitamins have no effect and in some cases they could cause harm. my favorite part about this was the part in the story where it said they just realized that it not only does it not prevent diseases, but it doesn't prevent death, either. >> no. we're working on that. >> did they think it did, though? >> no. that was any point. we just realized taking vitamins doesn't prevent you from dying. >> but they're saying all of these things, even the drugs that work, like lipitor, things like that, you can look at do they reduce bad cholesterol? does it seem like it helps in terms of plaque? and then long-term use, is there any change when you actually die and there's all these things
that go into when a person dies. but it is sort of interesting to know if you look, did that help people at all not die any quicker? >> do you take a vitamin? >> you told me to take a sen trum silver. >> i take a centrum silver. i don't know if i should any more. >> i don't even enough vegetables because i do the carb thing. yesterday, after i saw this -- >> those are good carbs. you can have those carbs. >> which ones? >> vegetables. >> no, but i usually just eat meat and stuff like that, which is bad. but i looked yesterday and i take two pills, this is tmi, but i take the centrum and i take a fibercon because i don't get enough fiber. yesterday i was thinking, if i were to not take one, which one do i definitely want to take? >> you're going to get rid of the centrum and keep the fibercon, right? >> right. i could be 20 as far as i'm
concerned. things are moving along. >> moving along? >> perfectly. >> i think we would prefer that you continue to take that, too. >> okay. you, too? >> i found things like vitamin b do help. if you think you're getting sick. >> how would you -- this is the anecdotalal stuff people use for this junk science. how would you possibly know whether a vitamin is working? >> it gives you some kind of energy or something. >> the thing that worries me about this is that what they do say is pregnant women should continue to take this. folic acid can have a huge impact. >> becky, the most interesting story, it's not this next one about the eye tan bacterial soap. >> no. the next one is my favorite. >> the more interesting one for you is that children that grow up with pets are much less likely to get allergies and other problems because it changes the bacteria in their
gut. >> really? >> so they have a different -- there's different bacteria that end up in your gut because the pet introduces these to you. >> hey, i'm all in favor of that. i want a dog and cat. >> you about you worry about germs. >> no, i want a dog and cat. >> why do you worry about bacteria everywhere? dogs -- i don't know whether you worry about what dogs do. they do a lot of stuff. and when they lick you in the face, you better know you just licked everything. >> look, i just think you kneed to wash your hands once in a while, that's all. >> your dog, and when your mouth is dirtier than your hands? >> just wash your hands. >> you get -- >> yeah, when i start thinking about all the nasty stuff. >> well, now you know you hurt yourself with this next story. >> no, this is very important. and i knew this. we stopped using anti-bacteria soap a while ago. but the fda says anti-bacteria soap don't seem to add any killing power to regulators and regulators say now the soap may
have new health risks. so the agency are asking to prove that the products that have anti-bacterial ingredien are safe and effective. this kal in this that has been they worry actu l hormonal issues. >> i just took antibiotics last week. >> no. that's antibiotics that you take internally. these are antibiotics that they add to the soap that creates super bugs because we're killing off the weakest of the bugs and letting the stronger ones stick around. >> and that's why we'll all have to take cypro in the furp because all of these things will be resistant. >> i have a lot of confidence that we will be able to find another pathway to these bugs to knock something out. you because we know more and more about how they work. >> there aren't any really new antibiotics in a long time. >> we could find one, though. there's a lot of different way toes attack these now.
you have to make sure there's no side effects, things like that. >> yeah, but if you get mrsa in the hospital and these things, there are some super bugs that can kill you. >> there's a million steps in the way these things flourish and survive. we're doing these rational drug designs now, like the key into a lock. a lot of good things. >> with your scientists/regulator hat on, do you think of this as overregulation? >> not as much. you know what i think of as overregulation? bloomberg. just anything that he's decided to do is overregulation. this stuff, you know, this -- >> okay. >> you don't want super resistant bugs. >> no. this is stupid. they're not even effective and they can -- kids who are using these things, they can affect -- >> how about the latest thing is the smokeless stuff, right? >> the cigarettes. >> and someone wrote in yesterday, just because water looks like vodka doesn't mean you can't let kids have it. you how would this cause you to
get -- how does some vapor -- they want to ban the vapor. >> i'm not a big fan of the vapor. >> it gets you off cigarettes. >> it gets people who were using cigarettes off cigarettes and the idea is should you be allowed to smoke these things in bars like that. >> you don't want any water vapor in bars, either? >> i'm anxious that kids are going to -- that these ecigarettes will become come lar and take kids who were never interested in either to be interested in real cigarettes again. >> i'd much rather have them -- if they're going to be interested in something, it's going to probably be cigarettes. i don't think anyone wants to smoke on an electronic device, do they? >> but that's my point. >> they think it looks cool to smoke an electronic -- i don't know. >> it could look cool. >> they think it might help other people quit. >> i used to think when i was junker, when i looked at someone at a bar smoking, i thought they
were coolinger than i was. >> but you don't smoke. you never have, right? >> no, i never have. >> i think everyone was cooler. it had nothing to do with the cigarettes, though. >> let's talk about andrew's column in today aps "new york times." it takes a look at bonus seasons. some say bonuses should rise as much as 10% across the board. but andrew points out that it matters who you are and what you do for a living. for example, if you are a bond trader, bonuses are expected to be tiny. i guess, andrew, your point was don't -- >> you stick your column in the things you talk about? >> i did not do this. the producer read the article and apparently liked it enough to put it in. i woke up this morning and got a note -- >> you had nothing to do with this? >> zero, nada. >> andrew, i think it's interesting because you're right, we are talking about bonuses being back, but this is not necessarily back to the heydays. >> it's not back to the heydays. and the bigger issue is the people who used to make the money money and the people who
had the most prestige to the fortune 500 ceos, those are the guys who made seven, eight-figure sums. they're no long ter hot property any more. you're no longer a hot property. the real hot property is basically anybody who is an asset manager of any sort, hedge funds, obviously, and others, and anyone underwriting ipos given that it was a hot ipo season this year. and there could be a secular switch, too, on this. it's not a one-year issue. >> it wasn't understood that this producer might get a bigger christmas present than some of the other producers on the set? >> i didn't say that. >> that is possible? >> they know where their bread is buttered. >> just like the disk jockey industry. >> it's old school. >> that is the way things work, isn't it? so it's okay then. >> thank you. when we come back -- >> "new york times"? where do you write the piece? >> the question of the day may
be the taper, maybe the question of the day and maybe the question of the year, to taper or not to taper. we're going to talk fed expectations right after this. but first, the mega millions jackpot is likely to pass $600 million ahead of tonight's drawing. tickets are estimated to sell at the rate of 11 million an hour in 43 states. at $586 million, the drawing is already the fourth largest ever. i bought some tickets yesterday. i guess i didn't win. i'm surprised. oh, it's tonight? oh, okay. i bought two tickets. i'm in. first, as we head to a break, take a look at yesterday's winners and losers. (vo) you are a business pro.
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and a 30-tablet free trial. i'm thinking about everything i'm saying this morning. so let me just -- is this true? is drama actually building? >> i think it is. we've been talking about it for -- back and forth on -- >> is it actual drama? >> in our world, yeah. >> okay. drama is building. over what the fed might say about its tapering after its policy meeting ends tomorrow. you know what we're going to hear on cnbc, like repeatedly in the next two days. >> taper, taper, taper, not to taper? >> no. all eyes. >> i already heard that about four times today. >> because it's not true. i would say very few eyes in the
country are actually on this. i'm keeping one eye on the lottery, too. >> i want things to be true. joining us now is beth ann fesino. >> you two might be interested in this, i guess. is it drama? is it high drama? >> i'm bringing my popcorn. >> how about? >> it's about time. we're ready for the reel to roll. >> you see, i think they should have done it the last time. they should do it before this time. >> i've been expecting them to do it december since june. i didn't think they happen going to -- >> why not? >> i thought there was a lot of uncertainty from capitol hill. certainly we experienced that. but now i think the fed has a lot of reasons to move.
one, the jobs numbers. that's pretty nice. and then we have the -- and then, of course, with all the fiscal shock we saw some really good readings just because of that. people are still spending. second, we're looking at the bipartisan plan, which shows that there is some fine that basically congress is willing to compromise. >> well, the two things that prevented them the last time, supposedly. one was the possibility of a government shutdown. and the second one was that they weren't sure about the employment numbers. so we've had a couple good employment numbers and we got the deal done. so they should do it. >> i think they were spooked by the feedback that they created. the interest rates start to go rise, it looked like it might have been impacting the housing market. and it spooked them, which is remarkable because when the marginal buyer sets the price, they're the marginal buyer of treasuries, they talk about buying less. of course the price is going to react. so it's remarkable that they were spooked by their own words. i think i agree, you know, we're
in an environment right now where whether it's industrial production, capacity utilization is back up almost to precrisis levels, those employment numbers -- not employment numbers, but the unit labor costs when wages are growing, absolutely, more jobs are being created, it's time. it's time to get a market determined interest rate. >> this is another one of those things, depending on who you are, that if there's no inflation at all and there still aren't enough jobs, why not just keep doing it? if you think it was somewhat effective to this point and there's no inflation and there's no downside, i think these guys in that room think it's all on their shoulders, the whole economy is on their shoulders. i wish they didn't think that. >> well, i think they also recognize and there's been a lot of talk about this, they're start to go focus a little bit more on the costs of quantitative easing rather than the benefits. and i think that's -- they're very well aware that the more they do it, you know, the less impact it has and the move costs they have. so i think that's another reason why they might need --
>> and what are the costs? >> basically, the cost of growing a balance sheet to the size of what, $3 trillion? >> that is what rick was pointing out yesterday, a that you're stuck with these long-term interest rates. >> if you look at the rise in the market we've had this year -- well, it's an opinion. but it's supported pretty nicely by the facts. >> which asset classes are involved? >> u.s. equities, right? >> you don't deserve a bubble territory. >> i would submit that they are. >> you would? you would submit u.s. equity price res in bubble territory? >> yeah. we had 5%. >> what's the multiple? >> we had 5% earnings growth this year on an ltm basis on pe worldwide. >> 99 multiples 18 times earnings. >> when it gets up around in the 20 level, tease when you tend to get overvalued. but it doesn't stay there for long. >> where do you think we are right now? >> probably on 2013 numbers,
we're close to 17. right? we started the year down on 13. >> on a bubble. >> it's not a growth bubble, but it's no longer undervalued. it's a bulk fair value. and this is more due to the rise -- you know, the rise in the fed's balance sheet. >> is the bond market in a bubble? >> there's a bubble there. >> given the global weakness in growth, what is -- >> think about what you pay for -- >> what would fair value be for a ten year right now wab do you think? >> think about it this way. how much are you paying for a dollar's worth of that sovereign income? about 60 bucks, right? 55, 60 dollars. normally you're paying something like 20. depending on where you sit on the curve, you're losing money on that income because you're still get ago negative real interest rate. the longer stuff, you're paying a lot more than the shorter. so yeah, i think you have a bubble. >> i go back and forth on that
because there are some people that think if you removed all fed accommodation, that rates would be pretty low because inflation is so low and because global growth rates are so low. when we talk about them, it bears repeating that it's not tightening if they start to reduce their bond purchases. it's like they're still driving, they're just knot on the interstate any more. >> compared to where we were. >> i'm not expecting them to increase interest rates until, you know, early next year. until 2015. >> in a car, when you go from 80 to 60 miles per hour, you can see it yourself. >> but you're still driving. >> you are, but you can feel the change in how, you know, it is the real thing. >> i think it begs the question, when they start to taper, you have to ask what's the end state look like? and i think the end state looks like ten-year treasuries somewhere on the order of 3.5%, maybe 4%. that's the end state.
because it -- >> maybe for good reasons, though, hans. >> those would be great reasons. >> because the economy by then, maybe we're at 3%. >> and that also means it brings up mortgage rates. so maybe with 3.5%, it brings up mortgage rates to maybe 5%. the housing market can with stand that. >> if people are concerned that the economy can't sustain the momentum without taper, the way i look at it is something would be profoundly wrong if the economy needs it, right? you don't have a market at 17 times earnings. if it needs assistance by a money printer. it's suggestive of some more more troubling thing, which i don't think exists. >> can i ask you one question here. i was listening to a report about the unemployment benefits this morning because they run out on december 20th. the extended employment benefits run out on december 28th for a lot of people who have been long-term unemployed. that number is something like
276% of the unemployed, which is a much higher population. i heard the american enterprise institute saying this is the wrong thing to cut these benefits at this point because you're going to push those people into welfare roles and this is something they think at this point reinvesting by keeping unemployment benefits is a good thing. what do you think? >> i think that the impact -- first of all, i'm glad there was some kind of -- some kind of compromise among politicians, right and left. that was good news. indeed, kind of the -- basically the sequester relief does help give gdp a boost in 2014 and '15 if it goes through. however, what you pointed out, that cost -- >> not extending the emergency unemployment rates for a lot of people who are unemployment, that's going to have a lot of people on people if they still stay in the jobs market, you're going to see a bump up in the unemployment rate. you're going to see a lot of people who had checks not being able to get them and they're not going to be able to spend. it's a big drag. we'll see what happens.
i was not expect that to be -- i was expecting it to be extended, so that's a drag for growth in 2014 and it hurts a lot of people. >> you know, i saw over the weekend, the cartoon, i guess it would have been in the post, but it had obama talking to someone and it said for every dollar of unemployment benefits, it's $1.80 you get back and obama says let's make them permanent for everyone, then. so obviously -- >> this was a question -- when do you, then? >> you're not dealing with a -- >> why not make them permanent, then? >> the point was, if the economy improves a little bit more, maybe over the next year, and this was the american enterprise institute. i did not expect to hear in from them. >> i know. but it's a contentious issue. once again, they've done all these studies about whether it's -- you know, when you stay out of it for that long -- >> i don't think you want to make -- >> but if you're looking at people who now have been unemployed for a year or longer, employers tend to look at people -- >> but i don't think it's positive just because they're able to spend money. eventually it becomes a --
>> but their point is these are people who are going to get pushed on to social security benefits as a result. >> or disability. >> or disability and that they'll get picked up that way and that will coast society more over 20 or 30 years. >> look at those programs, food stamps, we are -- it is exploding. >> but the unemployment benefits, if you get taken off of it -- >> i would add one -- >> anyway -- >> i would add one more point in terms of unemployment. indeed these people that go on, you're going to have a situation of you have the labor market participation rate at a 35-year low. this is even lower. that has long-term issues for productivity. >> thank you, guys. happy holidays. coming up, hit the road, jack. aaa's holiday travel predictions when "squawk box" returns. pires tdd#: 1-888-648-6021 out there... in here. tdd#: 1-888-648-6021 out there, tdd#: 1-888-648-6021 there are stocks on the move. tdd#: 1-888-648-6021 in here, streetsmart edge has tdd#: 1-888-648-6021 chart pattern recognition tdd#: 1-888-648-6021 which shows you which ones are bullish or bearish. tdd#: 1-888-648-6021 now, earn 300 commission-free online trades. tdd#: 1-888-648-6021 call 1-888-648-6021
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welcome back, the everybody. it is time for the "squawk box" mraern. we've talked about the fed meeting. also on the agenda today, we have the november consumer price intext hitting the tape at 8:30 eastern time. that is a gauge of inflation and that is one thing that the fed is watching ago it decides whether or not to taper. economy ichts are looking for the headline number to rise by 0.1%. then at 10:00 eastern time, we have the disease housing index seen rising slightly. and amc entertainment holdings, the parent company of amc though theaters is going public. the ipo is expected to price tonight. julia boorstin will have more coming up in the next half hour. that music that we played again at the top, how many times can we play that? how many times can we make fun of it and still fought get rid of it? we're not going to play it. when we come back, we're going to talk about the farm indicator. what sales of agricultural equipment tell us about the
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>> well, it's a little bit too early to go too much into detail, but we think we will face a solid year, 2014. so we are in the fourth record year in a row this year. and we think that we are in a position to stay on very, very similar level next year, as well. >> i realize you are a global company. when you look at what's been happening with agriculture here in the united states, there have been concerns. farm prices have hit record levels and seem to be coming back down a little bit off of that. the corn crop is not what it was a year and a half ago. and there are people who are now thinking that farmers are not going to have as much money to spend on equipment. what do you see? >> our analysts know the industry very, very well. they understand the business. i think what's important is farm income. and farm income in the u.s. in 2013, it will be up 15%. so farmers doing the last year's businesses and i think they will have the money to invest. everybody's expecting some kind of a slowdown.
>> right. i've heard about some corn farmers actually hoarding the corn, holding on to it because the price has come down so much. >> that's good for us. last year we bought a storage business, market leader in grain storage and grain handling. that's a little bit tail wind. that means when they decide to store, they might invest -- >> some of them investing in terms of the equipment next year. what do you see in markets like brazil? >> we see some because of the bnds which is the state bank system, basically they subsidize lower interest rates for investments. like farm equipment and other things. they make certain -- the government makes funds available. and they cut that down for 2014. so that might be a little more
difficult next year. >> we do a lot of that here. now we don't know what's going to happen with the farm bill. we do this ethanol stuff. do you lobby to keep these programs intact? a lot of people think they're just pork. >> one thing is, of course, most of the money in the farm bill goes into food stamps and farmers don't get it. only paid out. >> you like ethanol? you like subsidized ethanol? >> i like ethanol in a way that is -- first, i have to because it's good for our business. but in general, it's renewable. when you think about you might want to save some of the crude oils for generations, i think it makes sense. doesn't make too much sense. >> a lot of natural gas. >> that's the advantage of america now, but we discovered that recently. >> that's why corn prices are so high, though. >> in countries like brazil, where you can have it, that's a good alternative. >> okay. >> thank you, martin.
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taper now or taper later. ben bernanke and his band of central bank elves have a critical decision to make. >> it is not our fight. >> it is our fight. >> maybe cnbc's exclusive fed survey results will give the market a sneak preview. 'tis the season for outlooks and predictions. why not ask one of the most followed names in the financial world. jim grant of grant's interest rate observer will join the gang as guest host this morning. >> the best we've ever done. >> plus, the holidays mean big
debuts at the box office. >> i swear i'll be number one again. >> just in time for amc entertainment to make its grand entrance on wall street. >> nobody knows if this stock is going to go up, down, sideways or in circles. >> will it be a block buster open for the theater chain? >> i'm going to do what god put ron burgandy on this earth to do, have salon-quality hair and read the news. >> "squawk box" continues right now. good morning, i'm andrew ross sorkin along with joe kernan and becky quick. there's salon-quality hair on this set. we're doing well with ron burgandy there. >> steve liesman with the exclusive fed survey. but, first, before we do that, let's take a quick look at the
marke market. dow looks like it would open 17, 18 points high, nasdaq, a little over a point and a half in the s&p 500 would open up a point higher, as well. we see that at 2.87. let's talk about corporate news. facebook expected to start selling video ads later this week. the "wall street journal" saying the company plans to make an announcement today. here's the problem, at least for me, the ads are going to play automatically in user's news feeds. all of a sudden you're going to be watching something that you might not be planning on. also in washington today, president obama, he's going to be meeting executives from leading technology companies to discuss ways to improve health care -- the health care website healthcare.gov. going to include apple's ceo tim cook, eric schmidt, others expected to include netflix reid
hastings, also our own boss there, comcast brian roberts will be in attendance along with at&t's randall stevenson. that meeting will also include discussions of issues having to do with the nsa surveillance program and the impact on technology companies. the gathering comes a day after a federal judge said the nsa program appears to actually violate the constitution. >> you've got a cold. >> yeah. yours. >> i did not give you this cold. >> yeah, you did. huh? >> i cannot be held responsible. >> you're sitting right there and you had it last week and you were not yourself. you know, you were no fun last week. at all. remember? >> listen to you. >> yeah. >> i don't think i was contagious at that point. >> think, as if you would know. how do you know anecdotally.
can i read this? >> yes, please. >> it's been a week now since regulators gave the green light to the volcker rule. a piece in the "wall street journal" says banks are scrambling to reshuffle their portfolios. for example, firms are trying to line up a new way to finance muni bond investments. also, more than a dozen small and mid-sized banks are expected to need to sell collateralized debt obligations under the volcker rule under that provision which limits, as you know, what are seen to be risky bank investments. >> now, let's get to the cnbc fed survey. steve liesman joins us with the finding. we've been waiting to hear. >> yes, becky, and the answer is, not december, notary, but february. that's the average month. and we'll have a little change compared to our october survey from the october meeting. the start of the taper had been in april and it's moved back. you can see here to february. back two months for the average. and we'll see in a second that, in fact, the -- our 43 respondents are a little more hawkish than that. and i'll show you in a second. watch this, stopping qe, that
hasn't changed from december 2014. all we have here is a somewhat longer trajectory here. and then here we go hiking the funds rate, same thing, third quarter 2015 remains the same. but let's take a look at how this all works out. first thing you can see here is watch how the blue bars are the old survey and the green bars shifted this way. tapering up this way here. another way to look at it. we have stek as our operator on the camera. he can help us out. look at the plurality, here it was 44% for march, the plurality now 33%. tapering by january, that includes december and january. 55%. and then tapering by february, 62%. so you can see they're a little bit more hawkish than that february average, which is influenced by some of the green bars on the outliers. stays about the same, we're going to do $1 trillion this year. and you can see that's come down to about 450 from 650. so that $200 billion, that comes
off over the time period that they suggest it's going to happen. and finally, some tapering expected for 2015. 31% of our respondents think there will be some qe in 2015. moving on and how about the amount of taper. this is just looking at -- you can see here, we've come up, up there in october, we thought there'd be more in 2014. and now we see just about $500 billion in 2014. did we have another one? no, that was it. the average tapering we'll get to in the next hour. and we'll also talk about the different views here about why some people think the fed ought to go now. some people think the fed will wait, becky. >> if they do it in december, will you stop doing this? >> doing what? the fed survey? >> yeah, so we realize it's useless because they know nothing? if they don't do it in december. >> joe, it's sponsored. >> it's what? >> it's sponsored. >> oh. that's an awesome -- there's 40,
how many 40? 45, we know some of them. >> we know all of them. pretty much. between 40 and 60. >> knowing who they are also makes me think -- yeah, anyway. >> the fed follows this survey. joe, all it is. they don't have to be right. we're simply gauging market expectation. >> obviously they don't have to be right. they're economists. >> we try to figure out, is the fed meeting, beating, exceeding or otherwise what they're doing relative to what the market expects? >> the fed uses this as a tool to see if the communication is working properly? >> that's one of the tools they use. they don't release the results of that to us for three weeks. we can put this out and we know they read it. >> they do? >> the central bank. yes, absolutely. >> steve, thank you. >> my pleasure. >> we'll have more on this fed meeting. right now, we're joined by bob hellor, also a cnbc contributor and jim grant, he is the founder and editor of grant's interest rate observer. so bob, steve says the can
economists are expecting this not to happen until march. you think there's a pretty good odds of it happening right now, this week. >> well, i suddenly think they should be doing it right now. there's no reason for it to keep putting all that money into the market. the economy's performing very well, industrial production is at an all-time high again. so why not taper right now? all the stars are lined up. >> you know, bob, you've been in the room before, the two issues they can point to are the idea that the jobless numbers they'd like to see more months of improvement before they do something. the second would be the inflation numbers are running so low it gives them cover. how big of a factor do you think those issues play? >> well, they always are. and i think they'll be very stimulative discussion around the table. and the magic of the federal reserve board meeting really is that at the end there'll be a consensus. you'll have an almost unanimous, i don't think totally unanimous, but almost unanimous view that
will crystallize around the issue. one key person is janet yellen. does she want it off the table. >> jim, i know you think this is long overdue. a move to taper, the effectiveness of qe stopped a long time ago and there are serious problems that could come up from extending this, correct? you see it all over the economy. you see it in health care, of course, on swal street. ben bernanke addressing the students of george washington university. he seemed not to have the self-awareness to recognize what the fed is doing is exercise in price control. this is stocks.gov, bonds.gov. you know, you hear these
medications advertised on tv and they say, you know, for heart condition. then they tell you what they'll do for you. then in the end, they say, well, it could also induce hair loss, nausea, impotence, weight loss, weight gain. >> those are good things. >> cancer. >> then you think, heart attack, what's so bad about that. >> right. >> the unintended consequences of this exercise are much more interesting than the very meager results to date. and the unintended consequences will roll out over the years. >> i have a quick question for steve. "new york times" today, right here, many detect end of line for stimulus by fed. last week -- >> my good friend -- >> yeah. last week -- last week -- >> definitely not happening this year. same story with a different lead on it. >> no, he said will probably not come on wednesday. >> probably not come. >> what's happened here? >> i think he may have seen the world a little more like i saw
it. which is i very clinical, looked at the three tests the fed gave us, found them generally to be met and said it could happen this week. and i thought it was more likely than not. and the people out there agree with me. >> all of this is based on clinical stuff. >> you know, it's just our reporting, andrew. and just as much as you would discuss your reporting, i would discuss my reporting. >> i want to make sure -- >> it's more than clinical. >> it's more than clinical. he says it's -- >> can i ask jim a question? >> yeah. >> you've been pounding the table about the negative effects for some time, and i don't see them yet. when do you give up the ghost and say i was wrong about this. the currency hasn't crashed. and you know what, judging by how the market reacts to less qe or more qe, qe looks extremely effective. >> well, i'm reminded of the bra brainiac who said it's very well in practice, but what's the theory? tell me, steve, what is the theory of price administration. >> i'll tell you simply what the fed thinks it's doing.
it believes the zero lower bound it has a role to play in putting the economy back on the track of what it considers to be potential growth. >> five years and they are conjuring $85 billion a month with which to buy -- with which to buy securities, with which to enrich greenwich, connecticut even more. steve, i got up this early to talk. i can listen to you at home sitting in bed. let me finish. >> i thought the criticism of the fed was that it was hurting savers. >> the criticism of the fed is that it is embarked on a dangerous course of monetary manipulation. you said there's no inflation, how about on wall street, how about stocks and bonds and art and ferraris and farmland. assets are up. the asset holding portion of the community thinks it's great. you think it's great. >> it is not great. the fed can't -- the fed can change how things look, it can't change what things are. the fed suppresses the rate at
which earning assets are valued. and everyone thinks, oh, no problem. >> jim, what do you think our fair value is? >> okay. biotech, $600 billion market cap, never before valued at seven times book value, all these ipos. 33 times price earnings ratio of the few companies that have earnings. somebody's going to get hurt. and at the end of we'll say, oh, yes, they shouldn't have manipulated the stock market. >> but the idea -- as i said, the idea that something bad will happen is not a model. you call for inflation for five years, it never happens. at some point -- >> you know what a model is? not having a model. the fed would've done better by all of us if it didn't have the equilibrium model. >> not sure what that means. but okay. >> we're going to continue this conversation.
>> you're back on the -- you think you score points with saying that the savers are the same people that own the assets, they're not. the savers are the people that have $50,000 total in cds and trying to live on it. not the greenwich people. >> no, the savers are the rich people, joe. >> they're fine. he's right. they're fine. the savers -- >> it's different from -- >> but you can't argue. >> that argument two weeks ago, you bring it back -- >> did not. >> yeah, you did. >> savers are different than the people that own ferraris. >> the people with the money are the savers. they hold stocks and they own bonds. >> rich people get helped by this, poor people don't. >> rich people aren't in stocks -- >> if you have a lot of money, assets -- >> what has the fed done with mortgage rates? what has the fed done with mortgage rates? >> you can qualify for a mortgage if you have an 800 credit score. >> elderly people on fixed income. how about those people? >> they don't own stocks. >> some of them do. i'd say a lot of them just have the money. a lot of them are trying to live
on fixed income from cd. rich people don't have cds. greenwich people don't have cds. >> the poor have been hurt. that's the conventional wisdom at the table. you're sure? i don't agree one bit. >> we know that. >> i don't agree one bit. >> people can show you facts and you don't change your opinion. >> what facts, joe? >> because the rich people aren't in cds. they've got art. >> why not? by definition rich people are the savers. >> everybody's got a little savings and they're trying to use -- >> some are hurt more than others. >> the people hurt more than others are the people on the fringes and those are the ones who potentially could have been helped by the mortgage situation. the people who are helped the most are the people that are the richest. >> all those people. not people that arie looking at their -- >> some people got a much bigger bang out of this. >> they don't have mortgages they're paying lower rates on. >> not necessarily. if you don't have an 800 credit score, you didn't necessarily
qualify -- >> people who had 700 credit scores. >> steve, i know people who were under water in situations -- >> you could know any number of things, but that doesn't make it accurate in terms of the total percentage of people. >> we're going to continue this conversation. we do have a two-hour show today. steve's coming back later today. jim grant will be with us for the next two hours. bob, thank you for your time this morning. coming up, we have a top-ranked value investor. plus, more snow for the northeast. it could mean a winter wonderland on wall street today. we're back in a moment. the american dream is of a better future,
welcome back, everybody. in corporate news this morning, a federal judge has rejected nasdaq's bid to dismiss lawsuits by investors who accuse the exchange operator of botching the ipo. the status as a self-regulatory organization gives it immunity of claims it broke securities laws and negligent in how it executed orders to buy and sell facebook shares. speaking of the social networks public offering, a former candidate of governor of oregon has been sentenced to prison for fraudulently convincing investors. craig birkman told investors he would use the money to buy pre-ipo shares on facebook and other companies. instead, he used new investor money to pay off earlier investors and to fund his own
expenses. >> was that the "american greed" guy, too? >> i don't think -- >> another guy. >> different guy. >> two of them. >> "american greed's" like -- >> like "america's most wanted." >> yeah. >> it is. >> i had a friend who got to answer the phones. >> he did a lot. guy that tragedy hit him and he did -- he turned that into really -- >> when we come back, we've got names that should be in your portfolio. a special what's working is up next. with the fund manager who is not so hot for amazon.com. we're going to find out why right after this. trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms
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and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. welcome back to "squawk box." in the midst of a booming stock market, let's hear what's workingone guru's portfolio. paul isaac is founder and joins us onset this morning. good morp. >> good morning. >> let's talk about what's working. if you'd indulge me on one thing because we teased it before the break. we said there's one thing that's not working, something you don't like, which was amazon. and i'm fascinated because we
talk about amazon every day around this table. why don't you like amazon? >> there's a growth model where you have companies theoretically will grow into great profitability. and in the meantime, they're funded through the combination of negative working capital dynamics, stock-based compensation and anti-dilutive capital raises. and i think amazon is probably the most successful company in that model. it hasn't worked so far, some of the other things have worked. i think amazon has probably some very good businesses in it, but given its valuation, i think it's very expensive. >> are you shorting the company? >> yes. >> you are shorting the company. and separately before we get to some of the longs -- >> what price? >> well, we've actually -- >> your voice doesn't sound that high yet, but if you were shorting it at 200, you'd be talking like that because you were getting squeezed. >> some other things have worked this week, too. what we do is roll calls in it and basically have been doing --
>> people who have shorted amazon. >> it's been a hard trade. >> most of them aren't in the business anymore. >> you run a whole bunch of different positions. this wasn't hasn't worked. some other things -- >> you've been doing it for years? shorting it? >> we've shorted it off and on for some time. the short position that we have on now has gotten larger because the stock has run up. it doesn't start as a particularly large position. can't win them all. >> before we hit actually the long names. jim, i think you suggested in your own way that we are in an equity bubble. do you buy that? >> different question. which is that you have -- somewhat officially high valuation of certain equities because your discount rates are being suppressed in comparison to the very low bond rates that have been maintained as a result of fed policy. in that sense, you may very well be getting some distortion of the market. and i think the fact that the
stock market is as nervous as it is about the taper is an indication that other people implicitly have some concerns that your valuation relationships will change if you move away from this highly stimulative monetary policy. >> i didn't want to put words in your mouth. >> no, you didn't have to because paul just said them. bravo, paul. >> let's talk about a couple of stocks you like. capital senior living, why? >> basically it's -- you still have below replacement costs returns on independent living units. you're getting some escalation of rents over time. it actually is able to fund itself with term financing at very low rates today. and there's a -- it's trading at a reasonable multiple to the funds from operations partially because it's a c corporation, and it would have a significantly higher valuation. >> we're going to have to run, but devon energy you like and
xpress scripts. >> it's a reasonably priced energy company and they've done terrific over the long haul in allocating capital. >> amazon's going to make 73 cents. 73 cents, $388. >> yeah. but, look, the problem with amazon -- >> that is -- >> they probably have a pretty good media business. the problem is if they ever were to slow down revenue growth, they'd have a problem. >> we'll talk more about the fed, "squawk box" will be right back. change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 70% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence.
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sachs vice president to pay more than $1.1 million for his role in a failed 2007 mortgage deal. the trial stems from the government's investigations into causes of the 2008 financial crisis. and aaa says that nearly 30% of americans are expected to take a trip this holiday season. more than $94 million people will be traveling 50 miles or more from home some time between saturday and wednesday. it's going to be crowded on the roadways. >> it's fabulous fab -- >> was tourre already taken? >> he's on "the cycle." >> so we had to go -- it's got an "e," doesn't it? >> the $1.1 million they're going after, by the way, goldman sachs may end up paying. >> you've asked that before. >> i wrote about it. we talked about it on the show.
they claim there's no deal. but if you read the papers that the government actually cited this conversation. >> we've seen your column today. we need to go back and look up this previous column. >> you are grouchy today. >> he's got a cold. >> from you. >> by the way, if i get sick on my vacation, i'm blaming you. get away. you're disgusting. >> we've got to stop holding hands. >> doing footsie. >> that is so nasty. >> at least wash your hands with that soap. >> we have a fed panel now. >> he threw a dirty tissue at her and know her thing about germs. >> the fed meeting kicks off today and the markets focused on one thing. a finance minister and a former federal reserve senior economist and a professor at the
university of maryland school of public policy and a former treasury chief economist. professor mahon, we had an argument about savers being hurt. i think you've been a pretty big proponent of the accommodative fed and qe, does it ever cause you pause to think about people living on fixed income and the people buying rothcos are doing well but the people trying to make ends meet aren't doing so well? >> well, actually, i've sort of argued that quantitative easing three was one too many or perhaps two too many. and earlier in the segment, you had mr. grant talking about the differential wealth impact of the purchase program, the equity valuations are benefitting a relatively small share of the population. so what i see going forward is no taper in december because it's a little bit too early, but i think a nuanced approach to
taper in the march meeting will be to reduce the tapering or reducing the expenditures on u.s. treasuries because that's elevating the market too much. but they will continue to purchase the mortgage back securities because those are supporting the housing sector. and the bulk of wealth in the middle class is in housing. i think this nuanced approach to taper in -- at the end of q-1 is really the direction they're going to take. >> you weren't necessarily saying that -- that that was -- that you agreed with everything. you said what they're looking at. because the economy not that great. >> no, it's not. housing still isn't up, construction, employment, all those things. and that is what we're seeing from people that are sort of enablers. they talk about why not do it when things still aren't great and you're not seeing any negative effects anyway. do you think there are negative
effects that we will know about two and three years from now? >> no, i think the federal reserve has the capability to reduce the size of the balance sheet and continues to have inflation in its sights. i mean, that's one of the reasons why they're continuing on with the purchase program in both of its forms. the treasuries and the mortgage back securities is that inflation is still, you know, basically dead. they've got their eye on it, though. and they have the tools in order to prevent its return. we're not looking at 1970s again. >> professor, where are you on all this? >> i understand why the fed's going to wait. i do worry more about the asset bubbles and things about that. i'm not all the way to jim grant. inflation is low right now. i worry about the distortions in markets and worry that in 2015 we might see some of the negative impacts of the distortions caused by the fed. >> which market worries you the
most? is it a worry the fed's going to own a lot of this paper when rates go up they could have a huge loss? is it more what you think in just equities being valued at more than they're worth? >> yeah, it's probably the fed. i don't worry too much about the fed's profits. you know, i worry more about the bond markets that companies, i mean, sort of financing deals that you guys talk about every day have become addicted to that. kind of 2006 concern where any deal could be done. and when that environment ends, then we have fallout. >> we've got other people, i think of druckenmiller and other people, business people right now they don't know how it's going to play out the exit, they're not doing things now to help the economy. it's actually counterproductive and raising the uncertainty now because we're unsure of how the fed exits. and that's actually hurting the economy. is there any truth to that? >> that's interesting. yeah, sure, there could be some uncertainty.
the fed is, i think, given a road map of what they're going to do. and then, you know, we're into 2015 before the fed funds rate goes up. >> so, i think, you know, business is not investing because right now there's insufficient aggregate demand. and why is this insufficient aggregate demand? because the wealth and capability of consumers in the middle class really isn't there. and that's partly like we have a negative feedback loop because, no hiring, no demand, no hiring, no demand, no business investment. so i think focusing on the asset channel, which is the one that the federal reserve is focused on. they've sort of given up on the bank credit channel. and i think they're going to increasingly focus on trying to get the housing market really going more. small business and medium-sized business, they can't go to the markets use home equity lines of credit as the principal form of financing. and so, you know, this increasing focus on the housing market and mortgage back
securities is probably the direction they're going to go. i would like to see them do a little bit more on the credit channel. but they really don't seem to have been willing to go that route. now, janet might possibly do that. but bernanke has chosen not to. >> professor mann, this is jim grant. early in the 2000s, the fed decided to stimulate the housing market after the difficulties with tech. are we not going back to the same place? >> well, i think we're a long way away from where we were in 2007. so i'm not worried about, you know, repeating where we were back then. yeah, there are dangers, absolutely, dangers of focusing on mortgage back securities. we have the -- you know, we could end up in a situation where the federal reserve is financing f financing fannie and freddie. we like private sector participation in the mortgage market again.
they're barely there a little bit, but not really. mostly in terms of buying up a lot of housing and turning it into rental units. but, you know, i think that's the direction that we have to go. there's just not sufficient aggregate demand at the lower 80%. personal consumption expenditures were revised down in the last revisions to the accounts. if you look at retail inventories, they are way out of whack. the christmas sales are not going to be what people expect. point to a tremendous sluggishness kind of like the lower 3/4 of the income distribution. and figuring out how to manage that is something the fed cares about. >> okay. all right, professors. you do have a pretty good basketball team, i see. but maryland -- >> actually, we have a very good soccer team. >> soccer. the claim to fame. the claim to fame. >> fencing team that's great, too. >> that's what i do in my spare time. but i was listening.
anyway, thank you, professor. see you later. coming up, the parent company of amc theaters taking some very unusual steps in its ipo. inviting loyal customers to buy in alongside wall street pros. will the move pay off? julia boorstin has a take and the preview of the entertainment company's big debut on wall street. then at the top of the hour, the founder and chief investment officer of solus asset management. >> who? >> going to join us to talk fed moves and what he thinks the market will do in 2014. "squawk box," coming right back after that. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world.
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and a 30-tablet free trial. welcome back to "squawk box." we've got headlines for you. facebook is going to start selling video advertisements and the first ads are set to run on thursday. "wall street journal" reporting that the ads will automatically play in facebook's user news feeds and an official announcement expected today. the first ads will be a made for facebook trailer for "divergent." also, this morning, upgrading the rating on the stock and increased the price target to $68 a share. we were also talking about this
a little earlier during the break. amc entertainment holdings, parent company of amc theaters is offering small percentage direct to loyal movie fans. the appeal to movie goers pay off and will the stock have a blockbuster opening. julia boorstin here with more on tonight's big pricing. julia? >> amc entertainment holdings will price the shares that's expected to price the shares this afternoon to start trading tomorrow morning under the ticker amc. inviting the 2.5 million members of the tickets loyalty program called stubs along with the employees to buy and sell between 100 and $2,500 worth of stock each fee free through loyalfee.com. it allows loyal consumers to invest in ipos without the traditional fees. amc is allotting a small percentage of the offering for the loyal movie goers.
but if they become shareholders, that could give them more reason to buy movie tickets and give amc an advantage. in a business where consumers make decisions based on schedule and convenience. will movie goers buy into the ipo? the company's offering 18.4 million shares and $18 to $20 per share price range to raise as much as $368 million. now, investors would be buying into the nearly 5,000 screens which are 13% of the u.s. total screens plus imax screens and its rivals. now, in the 12 months ending september 30th, the company brought in $2.7 billion in revenue and nearly $200 million in operating income. it does have $2.2 billion in debt making it the most leveraged of the big three cinema exhibitors. debt which the ipo will help pay down. now, in comparison to rivals regal and scinemark, amenities
like bars attached to the movie theaters, but analysts are focused on dividend payouts. >> i believe that amc deserves to trade at a discount to both its bigger peers regal and cinemark. . they will have comparable dividend yields. regal has an established history of paying special dividends over the last ten years. >> the fact that pretty much everyone goes to the movies isn't the only reason investors and analysts may be familiar with the company. it has been public on and off over the years and it has publicly traded debt. so now we'll have to see how many of those movie fans take advantage of amc's offer. becky? >> all right, julia, thank you very much. when we come back, we have much more from our guest host jim grant. and coming up at the top of the
hour, we have the results from cnbc's exclusive fed survey. steve liesman breaks down what the nation's top economists are predicting. "squawk box" will be right back after a quick break. americans take care of business. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one. to help you retire your way... with confidence. that's what ameriprise financial does. that's what they can do with you. ameriprise financial. more within reach. open to innovation. open to ambition. open to bold ideas.
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overvalued. what do you think? there are distortions out there. the question is how big. >> by most numbers, the stock market is not especially overvalued. there are segments, biotech, for example, is definitely in bubble territory. i think that the clearer than the proposition that the stock market is too rich is the proposition that the stock market is being led rather than leading itself through discovery of earnings and how to discount them. you know, it's a basic fact of investing that you take a projected stream of earnings and discount that by an interest rate and then you have some present value. but if the interest rate at which you discount is under the thumb of the government, then every calculation is hash. and that to me is the clear and present risk of the stock market is that we seem to -- we necessarily living in a kind of hall of mirrors.
and these mirrors are not straight up and down, but they're contoured and make some things look tall, some things look short. and it's hard, you know. it's hard to know where one is. we're lacking an objective standard of value. it has come to seem normal. it's been five years, and we have guest upon guest come by and professor upon professor. and nobody seems to object that we live in a regime of administered prices. >> paint, though, the dire scenario. what is the tipping point? and what does the other side of it look like if this is a hall of mirrors that ends badly. >> well, if one can't know, it doesn't have to end dramatically and noisily quickly. >> so this could be a successful handoff where the economy picks up from -- >> it could be years ago, i would have been much more certain of the future. birthday candles have succeeded. birthday candles have become
humbler in the face of the unknown and the future does not hold. it seems to me the odds are against a successful withdrawal by the fed. people give the fed every benefit of the doubt. the fed saw none of this coming, not one of this coming in 2007. and now we're meant to assume that the fed in its wisdom and technical confidence will disengage from what it is wrought. and i say the odds on that as the common sense proposition are low. i think it's a buy between now a and the next year and a half. >> interest rates determined by people buying and selling and not by people administrating. this business about a dozen or
15 people sitting around a table and deciding what rates ought to be is such an inaccraism. >> it's an argument for central bank. >> what gives these -- what forward knowledge do they have? they will say we have 0% rates until 2016. is it going to snow next thursday. how can they possibly know what's going to happen? >> they've said everything they say is data dependent so they can change their mind. >> right. well, that case, it's not very helpful, is it? >> right. >> i think we ought to see qe and these other tricks in the context, for example, obama care. we live in an era of state administered pricing and control. and to me, qe is part in parcel of obama care. so we have a tiny publishing business much smaller than the "new york times."
now, if our health care plan is yanked in january and there's rumors there's more of these cancellations coming. then, will my cost of living go up 20%, suddenly? is that going to contribute to a free and easy christmas shopping season? people say, oh, it's all about tapering. no, it's all about -- it's all about statism it seems to me. all about the suppression of market forces, the campaign to raise minimum wages, to administer health care costs under the government's edict. all of these things contribute to a very poor -- >> one thing that people seem like they can always point to as a -- you know, you just can't argue with this. and that's that the mortgage market and the housing market has healed more quickly because of what the fed has done. and it's recovering. and my question is, it's nice to put off pain and think of all the programs that the government tried to put in to ease the pain
of the housing crisis and mortgage. when things don't clear where they're supposed to clear and sometimes, unfortunately, it does cause pain. and when you sort of prevent the pain near term, down the road, how do -- >> but that pain would have been so politically unpalatable. >> is there more pain because of what you did down the road? >> five years of more or less stagnation. the pain of 20 somethings not finding meaningful -- >> that's the thing, the pain of 60 million people on food stamps, the pain of all of these things. >> the question is whether the short-term pain would've turned into longer term pain. >> i think a threshold question is do markets work? do markets when left to themselves? do they clear and reach some sort of sensible equilibrium? >> when the housing market heals more quickly and you say, wow, the housing market has healed, is it built on a foundation that it would have been built up with normal market forces? or is it still sort of built up
on -- >> you have to decide the yields on the prices of the new houses are competitive with the rental yields. and you compare against interest rates, you're up against the fed's administered rate. everything looks a little better than it might have. certainly the fed has made it easier to get a mortgage, house prices are up reflecting that fact. but everything is -- >> comeuppance for that. >> 0% discount rate or 1% discount rate. >> i wonder if we don't know if there's a day of reckoning. japan found out, they're still finding out by not letting things clear. they should have. >> the fed invariably went back and said let us not have 1929, '32. >> all right. >> but there are other examples to look at. >> up next, though, fed and the markets. the president and chief
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the fed's in focus, the latest results and the exclusive cnbc fed survey and what it means for the markets as we kick off this two-day meeting. >> gifts for the super rich. ten must haves for the person who has everything. a special report from cnbc's robert frank. and breaking economic news. could low inflation number in november put further pressure on the fed not to taper? we'll get the latest consumer price index number as the final hour of "squawk box" begins right now. >> welcome back to "squawk box" here on cnbc. while you're down there -- welcome back to cnbc first in business worldwide. i'm joe kernan along with becky quick and andrew ross sorkin.
jim grant, founder and editor of grant's interest rate observer. today's top story is the fed and the start of that two-day meeting. we'll find out tomorrow what happened, and we'll talk expectations with steve liesman in a minute. ahead of that policy announcement. but futures this morning are extending yesterday's gains, at least a little bit up 30 points now. the ten-year eventually is going either up or down. today it's at 2.87. what do we think? three eventually? >> yeah. i think three. >> it'll be interesting if they taper if the interesting if they taper and went down to 2.80 or 2.75, that could happen. >> i think up. i think 3%. >> i'm saying down. >> i'm saying up. >> i'm saying down. >> now, becky, in addition to being wrong to where interest rates are heading has some of this morning's top headlines. >> what's our time frame on this so we can declare a winner? >> 2.87, i'll say by -- now i'm getting scared.
okay. by -- >> let's say by february 1st. >> no, i'm talking -- >> oh, the end of this week. i don't think it's going to be 3% by the end of the week. >> i think lower than it is now after they decide -- >> below 2.80. >> i'm assuming they're tapering. if they don't taper. >> you think it goes higher if they taper? >> i think -- >> 2.875 -- >> you think they're not going to taper? >> the argument is if they do taper we're talking about what happens. i say it goes down if they taper. >> down from 2.873. i'll take the up. >> i'll take the up, too. >> and by friday is our closing? close on friday? >> monday. >> i'm not here on monday. >> what do we get? >> nothing. i pick up that tissue on the floor. let's talk about some of the headlines this morning. shares of boeing getting a boost after the aerospace giant raises its dividend about 50%. the board approving a new $10 billion share buyback. the buyback will occur over the
next two to three years. another round in the her ball life battle. the company announcing a new audit yielded no changes to the financial statements. shares jumped on that news which was a blow to hedge fund manager bill ackman betting against the stock. in a statement late yesterday, ackman argues it's not the role of the auditor to determine if the company is a period scheme. he goes on to reiterate the company is a pyramid scheme and predicts it will be shut down by regulators. very different take from carl icahn talking to scott wapner on cnbc yesterday. >> i've never really doubted that this was a viable company. you know, i guess i was one of the few people that bothered to read that report a year ago when they made so much of it. and when you read the report, if you bothered to read it, it was, i believe nonsense then and i believe all these criticisms are pretty much nonsense to begin with. and other corporate news this morning, the company will
end linking to the number of prescriptions that the doctors write and stop payments to health care professionals for attending medical conferences. that announcement comes amid criticism of aggressive industry tactics. >> why are you shaking your head? this is a good thing. >> i didn't move my head. >> oh, i thought that was -- >> you wanting to try to start something? i'm for paying doctors? >> i thought you were -- >> i'm just sitting here. >> we've got a lot to talk about this morning. now we've been talking about the fed meeting all morning. an article in today's "financial times" said alternative bond funds apparently seeing massive inflows. this comes as traditional bond funds are on pace to say record outflows this year. let's get to cnbc's exclusive fed survey. steve liesman is back with more. good morning to you, steve. >> hey, andrew, and our survey of 43 economists and money
managers and advisers shows that the fed may have made some progress in convincing the market that tapering is not tightening. i want to show you how you arrive at that conclusion from the data. first of all, i want you to focus on this. this green line is the outlook for the fed funds rate in 2015. something the fed watches very carefully. this is what spooked them back in june and july. they started all that rhetoric about tapering not being tightening. it was up at 1% suggesting the market saw a lot of hike in the funds rate in addition to the tapering. and you see that coming down to 0.7% where it is now. and here's the outlook for tapering, how that's changed. it was gone when it was 0.82%, the outlook was april 2014, now it's come back to february. they've increased the pace or the timing when they think the tapering's going to happen. they have lowered the feds fund rate. that's one of the things the fed's looking for. the amount of taper that's expected. come up by about 1 billion. they were very optimistic.
thought the fed was going to be very aggressive back in july, 22 billion on average. that's come down a little bit, $15.2 billion is the expected taper. how about the mix? 36% treasury, 64% mortgage back securities, that's expected in terms of the taper. moving on now, i want to show you the taper talk which we talked about earlier. you can see the plurality of when this happens has moved from march and october survey to january, and about 55% think it's going to happen by january, february is the average. and that's changed, you can see quite a bit from where it was in the october survey. here are some comments that show on this issue of whether or not the tapering is happening. despite mounting evidence of an impending taper and compares that to last time. by contrast, when taper expectations first emerged in may and june of 2013, swelled to 528 basis points.
writes in response to the survey, tapering is coming and i expect qe to be reduced by 40% for the full year 2014 versus '13, but that's still a lot of money after early volatility, stocks should have another good year, he says. finally, points out that the federal reserve officials are wary of removing the training wheels too soon. at some point the economy will need to ride on its own, but policy makers are worried about inflicting too many scrapes and bruises. you can see from that chart, guys, an awful lot of dispersion as to where people think the fed will be. at the same time, i think what's significant for the federal reserve is the outlook for the fed funds rate in 2015 has come down while the talk of tapering has come up. joe? >> what do you think? we've been trying to figure out if the fed actually does taper tomorrow, what that does to the bond yield for the ten-year. does the yield go up or down from this? >> i think the yield is probably where it needs to be, not needs to be, where it probably will
be. the bond market has priced in more of the taper than the equity market has. >> so you don't -- >> i think we're right around there, 280, 2.90. >> so you're betting it stays where it is. >> it stays pretty much where it is. >> you're not helping. >> we're having a bet here, steve. >> well, what are the odds on the over/under. >> the odds are we do taper. what are your odds there, by the way? >> i think 55%, 60%, they do taper. >> those are not great odds. what is going on here? >> he's pushing the dirty tissues at me. disgusting. >> you dropped your mike again. anyway -- >> steve, you say that the market is kind of expecting this. >> treasuries, mortgages. >> they're expecting it's going down. >> what's that, joe, expecting the yield will go down. >> yes. >> that may be, but i think it has to do with the guidance. do they come across and say, we are tapering and on a march to
taper. or do they say we're going to do a little bit this month or go out and wait and see and we're also going to give you more guidance, forward guidance on rates, on the back end of this thing. that could change the whole mix and how bonds react. i think it's priced in in the sense that if you're not expecting a taper this month or next month, you're simply not paying attention. >> right. exactly. >> thank you, steve. >> my pleasure. thank you. >> how does an investor play the current market environment? joining us now is chris pachillo. >> got it. >> ceo and chief investment officer. >> yep. >> of $3.5 billion distress fund solus, up over 30% this year, a big player in the bankruptcy market. trading claims and mf global, bernie madoff securities and others to name a few. 30% is pretty good. do you do less well when times return to normal? >> not necessarily. more opportunities exist when
companies are in bankruptcy and we can play reorganizations, we can play liquidations. but there are good opportunities to buy and short in every market. >> what do you think you're going to be doing in 2014. >> i think 2014 will be very similar to this year. with lehman brothers and madoff, primarily. and post bankruptcy, post equities are very, very interesting opportunity that we did very well with this past year and we'll continue into next year. >> what kind of names beside the two that you mentioned. >> those are liquidations, post bankruptcy equities would be american airlines is the most recent. just came out of bankruptcy merged with u.s. air. mgm studios, i talked about that last time i was on. companies that had previously been in bankruptcy and equities trade at big valuation discounts to the rest of the market for a
variety of reasons including a lot of street analysts don't follow the companies, the positions tend to be closely held amongst hedge funds and other investors that it's difficult to get liquidity if you're a buyer. and, you know, takes a little while for those things to flow through. but once they do, there's a very big opportunity to monetize those positions, you know, more in line with the rest of the market trades. >> go ahead. >> chris, why did the market not see the fabulous promise in american airlines was trading so low? >> you know, i think there was some question as to whether or not the merger was going to take place when the doj stepped in and they tried to block it. we actually thought even as a stand alone it would still be fine, you know, from where all the claims were trading. and i think just generally, the market doesn't understand enough about the bankruptcy process to take the leap. >> is there anything that resembles that kind of risk and reward proposition out there
now? anything you really like? >> i think vistion is a similar situation. if you look as a sum of the parts. vistion is two businesses now, it previously was three. it sold. and it has a 70% equity interest and a climate control company that trades in korea. so those two pieces alone, the cash from the sale of that -- of their joint venture and the publicly traded value of the korean climate control company basically approximate where the stock is trading. they have a remaining business which is an electronics business which trades around 2.2 times ebitda and the rest of the market trades around eight in the electronics business. >> why is high yield overvalued if we're entering the sweet spot finally of the economic recovery. >> well, i think you have to look at the reason why high
yield is where it is and it's purely because of fund flows. more money has come into the market driving, you know, rates and structure, you know, to -- >> is this what grant's been talking about? the fed you're talking about? the fund flows. is that a code word for ben bernanke? >> i think that's correct. the liquidity that the fed has created in the markets, you know, has basically forced individual investors as well as institutional investors. high yield is very much equity-like risk. >> you'll call this -- you have no problem calling high yield a bubble right now? >> i don't think like using the word "bubble," sounds like hyperbole, but it's overvalued. and i think it'll stay overvalued for a little longer. you're only earning 6.5% in high yield and virtually taking equity risk. why would you do that when you can invest in equities and get actual compensation for your risk? >> yeah. >> not a bad way to go. >> guess treasurers -- i'm used to them being at 7%, 8%.
>> better off buying equities and treasuries than buying high yield. >> well -- >> remember when high yield was the thing? >> that's where they had high yields. >> that's right. there was a moment post crisis, that's all you did. >> well that was, again, that was also very much liquidity driven by the fed. a lot of money coming in, pushed people into high yield. if you compare 2003 recovery in the high yield market with 2009, you know, there's a big difference. one was the economy was improving -- >> and one was the fed. >> yep. >> there you go. >> thank you. good luck. you got $3.5 billion, don't screw up. >> nope. >> good luck. coming up, we're going to talk retail details with courtney reagan joining us with a special report on how outlets are fairing this holiday season. and coming up at 8:30 eastern time, inflationary data that could give investors insight on the state of the economy. november cpi, that's just ahead. [ male announcer ] what if a small company
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begins on saturday at 6:00 a.m. and stores will remain open until 9:00 p.m. christmas eve. toys r us will also offer shoppers to buy items online and of course pick them up in the store within an hour. analysts continue to believe that outlet centers are outperforming some of the traditional malls. some think it's the aspirational shoppers. others point to the experience that some of these outlets offer. courtney reagan is here and she wants to tell us why these outlets are in vogue. why is that? >> the latest nrf survey says half of consumers plan to do the remainder of the shopping online. well, online is the fastest growing shopping format. reit analysts say many outlet malls are outperformers within the mall operator's portfolio. 50 miles outside new york city, shoppers often wait in lines at woodbury commons premium outlets outside to get into some of the stores. why do they do it? for many, it's the aspirational brands at the lower prices, even if it's different merchandise.
others make experience out of taking half or full day to get to the outlets. now, international tourists are very important shopper for many outlets outside these major metro areas. it's not uncommon to see tourists bring or buy suitcases and fill them up for the international tourists the american brands michael kors among the most popular. it isn't going unnoticed by retailers. many are expanding, faster than traditional mall spaces. but macy's recently opened a full line, not a discount store outside chicago. here's what terry lundgren told jim cramer about their macy's outlet plan. >> we can put them wherever it makes sense. >> that's a nice growth, it's not in the numbers, i don't think. >> that's an uptick. and i wanted to get it right. we're now getting it right. >> outlets will start to look more like traditional malls in the future which may not be a
good thing. >> i guess for the mall operators. >> yeah, exactly. exactly if you have these full-line stores at an outlet and it's a blend of the two is that really offering what shoppers want if they go because they get this value at a lower price. >> what macy's -- what macy's was telling jim cramer, what terry lundgren was saying, they'll put these stores in, but they are full-price stores. >> exactly. macy's does these blumi bluming. and that's a full line regular macy's store. there's traffic, sales, people are going there and they're experimenting with it. they're taking their time as lundgren was saying, seeing if it resinates and if it works, they're going to take the time to get it right. it could be an interesting strategy as long as they don't go too far and it becomes a normal mall and then you lose some of the experience that people go to an outlet mall for. >> okay. thank you, courtney.
>> sure. coming up, the november consumer price index, those numbers and market reaction. we've got that still ahead. but first, what does an nfl football player do when his quarterback throws a key interception in a big spot in the fourth quarter? the video may give you a hint. "squawk box" comes right back after this. the american dream is of a better future, a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others.
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i'm supposed to listen to this music. >> oh, if you wanna be a cowboy. if you missed it sunday, you may be wondering where the wide receiver went after giving the green bay packers the ball and the win. he abandoned his team because his emotions got the best of him. he says in his words, i was very emotional, i cried when i got into the locker room. he's no stranger to sideline outbursts. he was criticized earlier this
year when he became overly agitated with quarterback tony romo. so there's history here. i think he had 11 catches, didn't he? and like 160 yards and he left when they were -- there's -- they were kneeling on -- you know, they were just running out -- they had like four downs, i think, to run out the minute and a half left. there was nothing else going to happen, but you can't do that to your teammates. jerry jones said that was the worst loss in history. it wasn't even a playoff game because they were up by, i think, 4 points, i think tony romo's awful good, though. you cried. >> i cried. >> you did. >> i cried thinking about it. >> all right. still to come this morning, the consumer price index set to be released. the markets are going to be watching for signs of inflation in the economy. right now as we head to break, take a look at the u.s. equity futures. you're going to see an additional 22 points of gains for the dow, at least up above where the futures would be set to open right now.
s&p 500 also indicated higher by 1 1/2 points. "squawk box" will be right back. hmm. mm-hmm. [ engine revs ] ♪ [ male announcer ] oh what fun it is to ride. get the mercedes-benz on your wish list at the winter event going on now -- but hurry, the offers end december 31st. [ santa ] ho, ho, ho! [ male announcer ] lease the 2014 ml350 for $599 a month at your local mercedes-benz dealer.
the american bankers association reports that the number of consumers who actually pay off the credit card balance monthly has grown 7% since 2008. according to a quarterly report out this morning, the number of subprime card holders has declined. and the treasury department reports a preliminary analysis of a new trove of hedge fund data shows the industry may not be as risky as conventionally thought. the tentative conclusion is based on the examination of hedge funds leverage levels, risk modelling and the amount of hard to value. that doesn't include what happens whether your earnings actually go up if you're investing in a hedge fund versus investing in an index fund. the government says it could reduce the support for high-cost mortgages as soon as october of next year. this is a sign of confidence in the recovery of the american housing market. right now, we're a few seconds away from the consumer price index numbers for november. this is a key number that the fed's going to be watching because it is an indication of
inflation. rick santelli is standing by at the cme in chicago. steve liesman is right here with us in the studio. and rick, i know we're looking for .1%, that's the expectation for the headline number. but, again, this is an important number for the fed because it does indicate whether inflation is tame or something they want to start paying attention to. go ahead and take it away. >> and the survey says cpi for the month of november was unchanged. you strip out the all-important food and energy, it was up a little more than expected, up .2%, no significant revisions. but, i do see that the cousin to the trade deficit, the trade account balance has now moved downward below the $100 billion. it's 94.8 billion. that is really somewhat amazing. so the current account balance unlike the trade deficit seems to be moving in the right direction. i'm not sure that we're going to huge impact off of that alone. and last month was revised from
98 and change to 96 and change. so, here we have a 2.87 yield on tens, hasn't changed dramatically since the date it was released. we're talking only up 15 dow points. that's not fair value, that's where the futures are right now. we still have some other information to come out for the rest of the week that may be important. i liked your piece earlier, becky, tentative conclusion. tentative conclusions. would you think of the data? >> you know, rick, i don't have it in front of me. they decided to upgrade the software. can you give me the year-over-years. >> yeah, 1.7 on core. >> yeah, we talked about a lot, the measure of the fed follows is the pce price index, which usually runs a little bit softer than the inflation index. and what i think is significant is people who don't think the fed is going to taper any time
soon point out inflation is running below their target as surely as unemployment is running below their target. you know, jim grant's onset and he has an argument that i think deserves a lot of credit and i've been through it a lot of times and i don't know the right answer, but the question as to whether or not changes in asset values into the price indicate. and, jim, i think it's clear had we done so in the earlier part of this decade, the fed would've gotten a better indicator of things to come in the economy than it did by not having housing values in the price indicator. your sense of what's going on with inflation right now and whether or not they should be looking at asset values as well. >> i think they certainly should be looking at asset values. you know, i think inflation is not so much too much money chasing too few goods as too much money, the object or objects that the money chases we find them out of that later. we can chase skirts at the check out counter or chase common
stocks at the corner of wall and broad. it depends on the cycle, depends on a lot of things. there is no inflation as conventionally measured. but conventional measures don't often tell us the next thing to happen. it was next to no inflation. inflation is not necessarily a leading indicator of inflation. one must be more all encompassing. >> just to point out one thing, i don't know if we said this before, but part of the reason it's lower is gasoline prices were down in november. i guess that's something that could turn around quickly, too. >> absolutely. one of the things i really like is dallas has what's call ed trm mean. >> some people want to know what's going with price of living.
they use it as a policy indicator. in general, prior inflation readings do not give you the future. that's been proven in one paper after another. research and what does. let me ask you this, though, in this globalized world where the supply chain is global, where labor in beijing is arbitraging labor. are you more sangone given the capacity. >> i would say. the exertions we ought to be seeing dwindling prices. prices ought to be softening. improvements in cost of production and techniques of production. last quarter the 19th century. the time of great technological progress was softening in prices. now we have more or less ash trail rule. prices have to rise 2% on the year. never mind, they say it, we have to have new central bank credit to affect that rise in prices.
seems to me in juicing the price level. not so easy to calculate. but in trying to juice the price level, we juice other things not intended. >> there's a lot of research out there that questions this notion about whether or not we ought to fear deflation as much as the fed does. >> if things get cheaper, most americans spend most weekends looking for that. why is that bad? >> i would tell you what ben bernanke would respond to. he would say when prices fall, incomes fall, as well. they can fall faster than prices do. >> that's not the experience in american history. it was a time of rising wages and falling prices. plenty where prices fell because of the race and real wages rose. >> do you feel that would be the environment given labor markets? >> well, i think the slack in
labor markets has nothing to do with the direct effects of monetary policy. i think obama care is more to do -- the uncertainties created in the world of commerce by unpredictable government action. >> i should point out, we'll report this later today that our economists and respondents to the fed survey, 60% believe obama care will be negative for near term and long-term growth. >> and it's not -- >> make sure there wasn't a short-term issue. by the way, you can go online and see the survey. short-term, long-term. >> and not knowing what your cost in life are going to be. >> you wouldn't know your costs the way the market was before. >> your policy wouldn't be canceled. >> depending on who and where you were. a lot of those policies got changed every year.
>> well, i think nothing like we're seeing now. >> i want to ask rick real quickly. i'm sorry, what were you referring to before? the earlier thing we were talking about. >> oh, you were talking about the risk in hedge funds. i like some of those. they had tentative conclusions. >> yeah. >> when you put the word tentative in there. everything after that, you can pretty much ignore. mr. grant, you know, the big boogy man, i understand why. but generically, oversimplify, who do you think a little bit of deflation would be tougher on? those that have a lot of assets financial assets in particular? or an average median income of 50,000? who would have a tougher time with deflation? the wealthy or the average? >> i don't know. >> a lot of traders think it's mostly going to be the people that own a lot of things.
the value of those things would move lower, where an average guy would find less activity to the upside of prices. second question, mr. grant, you are a legend down here. do you believe the headline numbers that measure inflation as used by the fed? and, of course, most of these statistics or do you subscribe to the revisions we've had since the '80s really point to the fact that you can get these numbers pretty much anywhere you care to massage them? >> well, it's to a degree arbitrary. and the thing you come up with is not necessarily your own cost of living. i say that everyone looks on these things with a degree of suspicion and quite justifiable suspicion because it doesn't really reflect what we all experience. >> thank you. >> all right. >> rick, thank you. you had a quick last point? >> i just wanted to make sure jim had the opportunity to make
the case for gold. maybe now's not the time. jim is the leading proponent of that. >> seriously, steve, one of the leading -- >> the foremost and esteemed leaders. >> we'll make sure we bring that up with him. steve, thank you. up next, though, we're going to talk about gifts for the super rich. big-time presents for the people who already have it all. >> well, they probably don't have a cd. maybe we should give them a cd for the super rich. >> snark. snarky snark. and music news for you this morning. seattle grunge band anywhenirva headed to the rock 'n' roll hall of fame. others inducted include kiss, and this induction ceremony will be taking place on april 10th in new york. by the way, people can't get enough beyonce. her surprising album selling more than 6,000 units in the first three days on itunes.
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the morning has gone on. we'll take a quick look. because shares of 3m might be impacting to some extent. now up 49. we were up 29. the company raising its quarterly dividend by about 35% to 86 cents from 64 cents. ahead of an investor meeting today. full-year earnings between 7:30 and 7:55 a share. and that bracket's a current consensus. i'd said that really quickly, but that was a huge boost, wasn't it? i'm not a smart man, but what did i just say? did you notice that? let me see if the yield had been. the yield was 2% and they went from what to what? >> 35%. that's a huge -- >> it's a huge jump. >> that explains why the stock is -- >> people don't raise dividends by 35%, they raise them by 10%. ge usually does it in december, too. not that i'm --
>> not that you're -- >> watching that closely. anyway, what do you get someone who has it all? well, believe it or not, there are some wish list items even for the super rich. our next guest is absolutely obsessed with the super rich. his name is robert frank. do you want to be the super rich? >> no. >> do you live vicariously? >> no, because they're important economically. and there are few people that cover them without judging them. that is my mission. the top 5% -- >> what you saying, judge them positively or negatively? >> i do neither. most media when they cover the wealthy, it's either stereotypes where they treat them negatively or idolize them. i do neither. and the top 5% of consumers account for 37% of outlays. that's why for christmas, they matter. talk about how they're spending this holiday season. the wealthy are increasing their spending, doing well as we'd been talking about all morning to $3.8 billion. that's for the top 1%.
spending per household around $3,400. but the big spending this year isn't going to be on stuff, on bling, it's really around experiences and items of lasting and enduring value. what i want to look at today, we're going to do the top ten gifts for the super rich. we're going to look at experiences mostly and start with a program called the ferrari on ice. a weekend in aspen where you stay at the five-star. they give you a fleet of ferraris and expert instructors so you learn how to drive a ferrari on icy mountain roads. you travel on a private plane to a dedicated snow track in steam boat springs. then after that, you get flown to a private dinner. again, a lot of people buy these super cars, don't know how to drive them especially on snow and ice. this is a safety thing. >> it's $11,000 for the weekend? >> but you have to own a ferrari first. >> oh. >> you've got to buy a ferrari and then pay the $11,000. next up, this is for andrew.
>> a vacation up here. >> yeah, there you are. extraordinary journeys, this is a safari company. they're offering the $1 million safari. for a family of four, start with gorilla trekking, go to big game, and the sarangeti. you get it to yourself. >> to yourself? >> this one, you get the entire -- >> $1 million, andrew? >> no, he had to share it. that's what's great about this one. you don't have to share it with anyone, you get the 350,000 acres to yourself. >> the whole thing? >> the whole thing. >> how many people were there when you were there? >> no, it's like -- >> anyone else is too many. >> 30 to 40 people. >> yeah. and anyway, you go to cape town, you do the wine thing, then you get a beach. anyway, it's a great safari. >> and victoria falls, too? >> you do everything. it's a 27-day thing.
travel with family is where the rich are spending money right now. now, the last one's for joe. >> who has a month to -- even if they're wealthy. >> joe wants a jet, right? so i went shopping. there's so many jets out there, used private jets for sale. i found you a g3, that's a good condition, really good condition, fairly low mileage, 3.5. but we can get it for you for $3 million. i know you're a citation, guy. i found you a citation ten, 1998, a lot of miles on it. but that one is $13.4 million -- the ge is $750,000. >> that's a steal for you. >> that is a steal. >> how much do the pilots cost? >> here's the thing -- here, i broke it down. i broke it down, you get $750,000. hangar's going to cost you
$30,000 a month. >> a month? >> the crew is $20,000 a month. crew training $4,000 a month, insurance $1,000, navigation subscriptions, you need subscriptions to your navigation system. that's $1,000 a month. you're talking $60,000 a month before you've even flown. >> then you've got to pay for the fuel. >> jet fuel's $1,800 per hour. people told me unless you fly at least 125 hours a year, it's better just to charter or to do a jet charter or something else. >> at this price point or any price point? >> the problem with this price point, you're going to need so much maintenance and engine upgrades on this plane, it's going to cost you. it's amazing. you can find jets for $500,000 -- that's at gulfstream. you can park it in your front yard and say i own a gulfstream. and just take pictures of it. that's worth it. >> robert, the thing is, victor now has the beach craft turbo prop it's like $3,900 an hour. if you add that up, i guess if
you got enough people. if it was just you, it's ten times commercial rates, really. >> it's just who -- >> who can spend ten times the commercial rate just because they want to? you've got to be .0001%. >> they say to own a private jet, you need at least $100 million. to charter or fly private, you need about $30 million. so $30 million. and then occasional flyers 10 million and up. >> i think he's the only one around here. >> okay. that was -- that's what they're buying. >> fantastic. coming up, jim cramer's take on the fed -- >> sorkin with the book and everything. >> and much much more. we're coming back.
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this is the first one that fell down and it's come back. >> if dow components start raising their dividend -- that is significant, 30%. you think other people have money like this in this economy? >> boeing very big dividend boost. what's happened is these companies that aare internation companies -- 3m is located here but it's an international company, boeing is here but orders are overseas. they're not really focused on tapers. he doesn't focus on the vikings either. he's not a football fan, he's an ice hockey fan. >> you're still talking about the vikings. i'm sorry about that. you're still in first place, aren't you? >> yeah, but this game on sunday night, i hate to say this because it's on tv, but if the cowboys win against the redskins, the game is
inconsequence. >> sunday the cowboys during the day and then the eagles. god, if there was just a network great enough to cover the eagles/bears game on sunday night. >> nbc flexed it. >> is that going to be on nbc that night? >> yeah. they flexed it, which means the eagles know whether the cowboys won at 1:00, which changes everything. >> i was hoping there would be a network with the guts to carry that that night. >> you knew that. >> thank, jim. we'll see you? just a couple of minutes. coming up, guest host jim grant on what you could expect interest rates to do with the fed decision. we have a bet on -- >> you took the under, we took the over. >> what do we get? >> nothing. >> stay tuned to cnbc. walter robb and john mackey,
i have taken the over on the 10-year-year-old, joe has taken the under. what do you think? >> i don't know. >> we don't either. >> you don't either, joe? >> no. >> i think it's a very healthy thing for us to all admit it, that we have no clue. >> i think the rates will go down. >> this gets back to your point that the fed has made it an artificial playing field at this point. we don't know where rates should be. >> free interest rates, that's my program. >> steve talked about gold. we have not talked to you about gold today. why don't you tell us where you think we should be in terms of a gold standard. >> first of all, let's talk about the gold price, which has had a terrible year. new mining leads the s&p 500 by futility in half. as an investment proposition it's weather the fed and central banks really do have it wired, whether they have it under control. if you don't think that, if you think that the central banks are the problem, not the solution, you are i think well advised to
look at gold as an investment. now, as to gold as a monetary standard, steve asked for a very concise answer of why that might be the way forward. and the way forward -- the answer to me is that it has worked. it has worked demonstrably over the course of hundreds of years. and it is as imperfect as any other human contrivance but is among the least imperfect of these monetary systems. we've tried them all. >> what about bitcoin? >> bitcoin is the u.s. dollar without the united states navy behind it. it is a fiat currency without government. so i think it's even less than a dollar. >> though the people who promote bitcoin say this is a way of getting around the federal reserve. you can never create more money. >> it's a payment that's different. the fed at least has the decency
to present a balance sheet. bitcoin is whatever someone wants to pay you for. ebay is in the business of payments technologies but that's not money. >> jim, thank you. >> you're welcome. >> appreciate it. >> make sure you join us tomorrow. joe, get better. "squawk on the street" begins right now. ♪ luck be a lady tonight >> the jackpot $586 million now, they say it's headed to a billion perhaps. welcome to "squawk on the street." i'm carl quintanilla will jim cramer and david faber. the fed meeting begins today. cpi relatively mild. the