tv Squawk on the Street CNBC December 19, 2013 9:00am-12:01pm EST
through. all i know is we need to find a way to work with russia. >> it's just going to make him mad, i think. i don't know. we're tweaking -- >> we need russia on every big problem to resolve it. >> tom, i want to thank you so much for spending the time with us, it's been great. that does it for us today. make sure you join us tomorrow. right now it's time for "squawk on the street." good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with simon hobbs and kayla tausche. cramer and david are off today. the dow surges nearly 300 years. futures indicate we are going to give some of that back this morning. the 10-year note near the highs this morning. gold is being absolutely punished. a six-month low down more than $30, did briefly trade below 1,200 earlier this morning.
a road map goes like this. with the taper heard around the world, stocks soaring during trading yesterday as the fed announce it is will start pulling back on its monthly bond purchases. now the big question, where do we go from here? >> plus facebook ceo zuckerberg hitting the sell button, 70 million shares with 40 million of those being sold by the facebook ceo himself. >> and major security breach at target stores across the country. the retailer saying credit and debit card information was stolen for get this, 40 million of its in-store customers. >> and oracle reporting better than expected results in quarterly revenue. we'll see what that can signal about a possible rebound in i.t. spending. first up, amazing action yesterday, a will the lot of th, even seasoned guys, saying what a ride. here's the cover of "usa
today"'s money sex, "5 reasons there was no taper tantrum." >> i love that phrase. paul ryan said the taper came too late but it's hard to argue with a market rally of 300 points that says finally we are rebounding and the economy is strengthening in a big way. >> as somebody put it overnight, this is the best sugar coating you're going to see through the holiday season. for risk assets short term, it's great news. not only do you have an inflation flaw -- you know that the tape ser going to be mild right the way through the year. it's going to take them a year to get out of this. longer term you could question what it would mean for the economy and whether they're blowing bubbles in a greenspan style of way. >> let's talk about the markets and reaction to yesterday's decision. let's bring in lisa black and brian bellski. brian, were you taken by surprise? >> no, not really.
we had a 50/50 shot at seeing tapering. i think the key thing with respect to what happened yesterday of the tone with respect to what's going to happen with fed funds. that's clearly what the market was looking for and really the message in terms of a change in fed policy is not going to happen until we're square live bel below 6.5% unemployment. we're still sticking with our forecast of at year end of 2014. the first part of the year we think the s&p 500 will exceed the 2000 number. at some point things will overheat and the fed will be the scapegoat for a pullback early to mid year but the bull market continues. >> lisa, people are a little worried about the belly the curve. what's your outlook for the coming year? >> we think we're going to see a modest increase in interest rates over the coming year.
our forecast is the 3.25 to 3.50 for the coming year. not as dramatic as when the fed first started talking in early may. >> can that happen gradually or are we at risk for a more volatile -- >> we think it will be more gradual. >> lisa, do you see any contradiction between the two sides of what bernanke is saying? on one side he says i do this because the economy is improving and on the other side he says very clearly repeatedly throughout that news conference this is not a tightening of monetary policy of any way overall. >> he definitely is -- they're playing a fine line here because in fact the economy while showing signs of strengthening still has pockets of weakness. employment of course is the primary concern that they have and the tapering -- continuing tapering will data dependent as it has been. >> the caution inherent in
bernanke's statement yesterday was a reason behind the choppy dollar yesterday. do you think that caution is founded? what do you make of that? >> i think the trade on the dollar quite frankly, kayla, will be over the next several years. the dollar will recorrelate back with the economy. we think the dollar has hit a secular low in the quarter of 2011 and will continue over the long term to strengthen over the economy strengthens and as investors around the world continue to come back to america as a form of stability. on a near term basis, especially given the move that we saw in yield on a short-term basis, the dollar could see more weakness. but longer term we've clearly think that we've seen in recorrelation and reconnection of the current circumstance the economy and the stock market from a longer term basis and that's very good for the u.s. >> brian, to come back on what you said at the beginning, and i now paraphrase clearly, this all
ends in tears for the stock market. that's what you said, didn't you? at some point the stock market falls and the fed will be blamed. >> yeah, because the fed's been cheered for what's happened so far. i think it's safe to say at some point things could potentially overheat and the fed could misstep a bit because it has historically. and we think, too, it's going to be more about perception versus reality, simon, in 2014. we need some sort of a reset after six unprecedented years of growth in the stock market. we need to start that transition from the need for monetary policy to fundamentals in some sort of misstep from the fed or language or perception we think could cause a pullback, but that should not dissuade anyone from the bull market we think from the secular basis that is very much in place for u.s. stocks. >> lisa, do you think the fed is more worried about having to fight inflation or deflation? the conventional wisdom is that central banks in general are better at fighting inflation than the latter. >> yes. and we think their main focus is
actually on deflation. given that the consumer price indices are running in the low 1% or lower than 1%, that is still a major concern. >> he was asked specifically if you have to come back and do more. obviously he wants to reassure markets that his hand is on the -- if you're trying to teach your kid to ride a bike, your hand is never far away from the seat. >> absolutely. i think they have been very clear about signaling that if in fact the market needs -- for the fed to be more accommodative, they will. >> lisa, brian, what a day yesterday. we'll see what it sets up for the coming year. thanks so much, guys. >> thank you. >> meanwhile, when you take a little look at a more granular look at the market, we're watching facebook. the social network announcing a public offering of 70 million of its common shares. that includes more than 41 million being sold by mark zuckerberg. proceeds $2.3 billion.
they're expected to go towards satisfying taxes related to the exercise of an option to buy 60 million class b shares. if you are mark zuckerberg and you're looking at these shares and seeing them up 45% from where they opened and you have an option to buy at 72 cents on the dollar, i mean, that is -- 72 cents per share rather, not compared to par, that's a pretty big move. >> normally if a founder was selling out stock to the tune of what did you say, $2.3 billion? >> right. >> that would worry people there was insider selling. the bigger issue is he has so much of the stock, there's another billion he's donating to a local charity. >> he still has a super majority, voting control in the company. it's interesting. even though he is selling piecemeal, i don't think that investors are really dissuaded by that fact because he's not offloading -- >> the whole secondary is about 3% of the flow. as you mentioned, it goes to charity, it goes to the taxes. he's going to have 62% of
voting, almost 19% of the outstanding shares. it's not a dramatic move. it's also being maybe buffeted by a decision by a district court that says the company will have to face the lawsuit of those who accuse the company of misleading investors in the days ahead of the $16 billion ipo. >> giving some information to analyst who is then peddled that to clients rather than -- >> and a weaker tape than we're used to. >> we get video today, don't we? isn't today the day they roll out the video ads? >> i don't know. >> i believe so. today is apparently the day. >> in other corporate news, target is reporting a massive security breach that may have compromised the personal information of many millions of customers. mary thompson has more on an extraordinary revelation. >> reporter: this appears to be the biggest data breach at a u.s. retailer since 2005 when 90
million data at tj max was compromised. those impacted, customers paying for their purchases with credit and debit cards at target's 1,800 stores. online shoppers were not affected. the breach took place for 19 days. target is working with law enforcement officials, including the secret service and a third-party forensics firm to identify the thieves. while target didn't specify how the data was accessed. time rhine of krol said it could be malware where you swipe your cards. that data can be used to make fake card. what's on the card is the name, credit card number, expiration date. it can be used to create fake cards and this is called track data. on the black market, it is far
more valuable than the data you might glean from an internet prn. this is all according to a cyber security analyst at the gartner group. they are advising patrons to monitor their accounts to make sure there is no suspicion activity. if there is, you should contact your financial institutions and those financial institutions want to know because banks pay for fraud when a card that is committed in person, the retailer covers it in cases of mail, internet or phone purchases. it's a developing story we'll be following all day. >> this is not somebody who hacked into the main frame or the online presence. this is actually at the store level tampering with the individual machines on a mass scale? >> reporter: on a mass scale. those point of sale system, we know them, we swipe or debit and credit cards -- again, we don't
know this for sure. this is speculation this could be how they accessed that data. again, they didn't access target's online customers. it was an in-store operation. >> mary, is there any need for a response from the card companies themselves, mastercard, visa? td bank is behind target's cards. even though it's at the point of sale system, what do the credit card companies think of this? >> reporter: they're concerned. they're the financial institutions. if there's a fake credit card johnson rate generated, they'll be liable for this. they're the ones that noticed the suspicious activities and they notified mastercard and visa and they triangulate essentially. you have visa and mastercard. the card issuing institutions like the bank and eventually you bring in law enforcement to identify where the suspicious activity is coming from. >> what's interesting is the early reports from the journal said it was really limited to
the thanksgiving day weekend and then target came out and said actually it goes beyond that, as mary said. so we'll see if this is really where it ends. thank you, thank you very much. >> the cloud giving lift to oracle's quarterly results. also ahead, earnings day for carnival. >> take one more look at futures after that 292-point gain yesterday. more live from post 9 in just a moment. 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. ♪
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oracle, a better than 2% gain in the quarter. helped by cloud-related products. our josh lipton has more on that. >> it has not been an easy year for oracle investors. there have been a lots of worries about the software giant, soft i.t. spending in general and then ongoing pressure from cloud computing vendors. the stock of oracle flat on the year, just edging into the green. in fact, this is its smallest yearly gain in nine years. yesterday after the close, oracle did report revenue rising 2% just ahead of the street's expectations and bookings for cloud products jumped 35%. the cloud was a clear big theme on the conference call.
the cfe said that oracle was going to take market share in the cloud. she also couldn't help but take a nice jab and rivals saying oracle would still make money, quote, unlike all those loud companies." and larry ellison said their new database is seeing more interest than any recent database company. there had been speculation on the street we'd see a reorganization of the u.s. sales force. none was announced. but ellison did talk on the conference call about how his fails force is divided up and ready for battle with some focused on sales force and others on workday. they expect 9.2 to 9.5 billion, in line with street estimates. >> it will be interesting to
watch at the open. thanks for that. >> art cashin has seen husbais e of fed-related rallies. and later the new ceo of auto parts maker johnson controls. how concerned is he about ford's lower profit outlook for 2014? one more look at futures. we'll get that opening bell in just about 12 minutes. don't go away. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account.
today's session. art cashin is with us. art, good morning. it feels a about the like the morning after the night before. you describe it as five minutes of near insanity that drove us to that rally last night. >> yeah, i think if anybody missed it, obviously what happened, the statement hit, the yield on the 10-year spiked up above 2.92. that had every bid here on the floor cancelled and stocks began to plunge. they were down about 70, 75. and within a minute and a half, the yield on the 10-year slipped back below 2.9 to 2.8, nearly a full basis point move down from it and everything reversed. so i guess we should be happy for the high frequency traders and the algorithms that they serve. >> in the meantime a lot of people are very happy with what
they heard yesterday on many, many different front. >> i think several things happened. bernanke actually made everybody right. they tapered in january but announced it in december. i think the purpose there to some degree was there is no press conference in december. so -- in january. so he preannounced it so he could prediscuss it. >> highest volume on the nyse in three months. is that symbolic or substantive read of the taper? >> i think another factor is tomorrow, the expiration is going to be enormous. there are about eight different reweightings going on. i think a lot of people were standing in the wings and when they saw the market move, they had to rush in to kind of protect themselves from any reweighting on friday. if you're going to have to buy x, y, z stock and you haven't bought any and suddenly they're getting away from you, i think that's what increased and it may be a factor in volatility today
also. >> it occurs to me this time last year, art, we had zero clarity on fiscal cliff. we didn't know how january 1 was going to go. this year we've got the taper, we got a budget deal. it's like the polar opposite. >> and you would think it would make everyone feel a good deal more relaxed, but we still have what we used to call real life going on. you had initial claims this morning, came out and shocked everybody. now it might be seasonal adjustments and whatever. but that has moved the yield up. it is at 2.94. you get above 2.95, that's going to add a little negative pressure to stocks. >> so that notion which you've been preaching for weeks is in tact, even after yesterday? >> i think so. i think the point of relaxation that simon referred to was from them anchoring very hard. we're going to keep the zero rate possibly into 2016 even, and a much lower level. >> but he did pull off the
messaging for the short term, pulled it off for the market. >> it's been very effective. he's been saying for weeks i want you to believe that tapering is not tightening. and by being so forceful about the fact that they're going to stay at zero, even if unemployment gets down to 6.5 -- he's also now given us multiple targets to lock at inflation and whatever. for the first time he effectively got that point across. that was a good deal of what the rally was about, gee, he's dead right about that. >> and he also said janet yellen has been making these decision business my side, she will continue to, she made this decision to me with me. how comforting is that to know? >> it appears there would be some continuity and it appears there will be continuity. when bernanke came on, he took pains to say he wouldn't stray
far from greenspan. >> but obviously he hasn't, just keep pumping liquidity, it's what this country does. >> and i have made this case in presentations that this goes all the way back to before y2k, long-term capital management. they pumped in, they never took the liquidity out. y2k came about, people were going to raid their bank accounts, they didn't and they took that out. they've been shoveling money at the market for a long, long time. >> in a word then is yesterday's action in any way a tell as to how we might be trading over the next few months? >> well, i think it's spread the cheer for the santa claus rally. i don't know about a couple of month. but i still maintain that yield on the 10-year is going to be critical, above 2.95 some pressure, above 3%, a lot more pressure. >> we'll see what happens if and when we get there. thanks, art cashin.
you're watching cnbc "squawk on the street" on this thursday, live from the financial capital of the world. we'll get an opening bell in a little over a minute. after yesterday's rally, as we said before, we opened this morning at a record high. best nyse volume yesterday in three months. biggest rally in two months. third best day of the year. the question on everyone's mind is can it continue? futures would indicate we're going to give some of at that back. gold down 31, 10-year up to 2.92. people will have to regroup. a great point by art cashin a few moments ago that the reweightings tomorrow drove some forced buying yesterday. >> i like how he called it five minutes of insanity following that statement yesterday. you did see that movement on the yield on the 10-year and it hasn't budged all that much. it's still pretty much in one
solid, very tiny range. >> of course we'll get some data. we've already gotten claims, the highest since march at 379. at 10:00 a.m. we'll get philly fed, existing home, leading economic indicators. so the drum beat of data continues. there's the bell. [ opening bell ringing ] down here on the big board, heart share human services, helping those with aids and costs. and one of the big movers will be dardin, dri, which has announced plans to sell off red lobster. they've gotten a lot of pressure from barrington capital to do
something, spin off lobster or olive garden or both. >> they wanted them together. they said these are the two underperformers, spin them off into a clunky dividend payor. the wall street journal said you probably need change at the top. it's lagged roadhouse and cheese cake and a lot of companies that are seeing that comparable -- >> the promotions simply haven't been working at red lobster. the crab feast at $20 and they replace that for $10 for two baked seafood entrees. >> you're not buying the entrees? >> on the believe you will get the restructuring, the valuation multiple at which it trades has been rising. it's trading now about 17 times earnings on the basis this stuff will happen but, as you said, it's not quite what people had anticipated. >> and still cheap relative to
its here. we had dominic chu talking about those yesterday on the show. >> some call it their best long idea because of low hanging fruit. they're going to forego acquisitions and cut capex. target is one of the big stories in the news. a massive data break that could affect potential customers who went to target between november 27th and december 15th, which includes black friday. we heard on twitter that the account to check your account is not working. >> a lot of volume there. >> you to imagine. >> and if you are target, you want to make sure you're going through all of your operations where you're collecting this data from consumers with a fine tooth comb to make sure there aren't any loopholes in your fire walls to make sure this doesn't happen again.
over two weeks, the busiest time for retailers -- >> don't use atms on isolated locations where people can do this all the time. if you live in the city, just don't do it. these are machines that are within stores watched by staff and apparently were tampered with. imagine what they can do to an atm late at night. >> there have been a lot of different companies and types point of sales transactions that have been targeted at these hackers. gas stations have been targeted by people who put a strip behind where you put a card in to fill your tank at the pump. people are saying pay with cash inside. at what point can you not live your normal life because you're in fear everywhere you go. >> carnival beat expectations. we'll talk to the ceo later? >> we are going to talk to the ceo later. it's going to be a fascinating conversation with arnold donald. the news conference starts at
10:30 eastern. the question is to what extent will this sacrifice price in order to fill the ships. they said they focused on the customer. a lot of people have a lot of questions about what arnold donald is doing here and whether at what point they can come back and say we are over the difficulties like the carnival triumph and the costa concordia. >> it might be an interesting day for i.t. products and consulting. acce accenture is one of the, a stock that has underperformed this year and oracle is the number five gainer on the s&p as job lipton told you, 35% jump in cloud revenue. more importantly some say hardware sales, which had been a real lagard.
>> this is supposed to be a growth company. >> also oracle touting its diversity saying we're so diversity that when the other pure play cloud companies don't fare well, we can still fall back on our products. ubs initiating a lot of these companies. delta its top pick saying its unique flight strategy will be a winner there, southwest initiating with a buy. american saying the forecast could be aggressive as they try and integrate that merger. >> you could argue ubs is slightly late to the party as you look at the delta -- >> it's an initiation, it's not an upgrade. delta is one of the big gainers today. and the ceo, richard anderson, saying they're not going to allow cell phones on flights, even if and when the government
says it's okay. >> thank goodness. i fly delta frequently -- >> a lot of these airlines are not interested, apart from the courtesy argument, they're not interested in investing in face boxes on the aircraft to transmit cellular signals when they've done that for wifi. it's not in their economic interest to jump through that again. >> i also think they don't want to deal with more customer complaints they're already dealing with. they field scores and scores of complaints with the flights not being on time and service not being good. why add another thing into that mix? >> a quick check on facebook, down 2%. we told but the secondary coming, the majority of that coming from mark zuckerberg as he tries to pay some taxes, give some to charity and book a profit on a certain number of shares. facebook does enter the s&p 500 tomorrow. i think i asked -- people were wondering when are they going to
go into the s&p. it took google 20 months from its ipo to its inclusion. i think it took facebook a little longer than that. >> i think the first two months of facebook's trade was a wash for most part. you couldn't really track it. there was a big overhang with the botched ipo. so smooth sailing -- but but that's a lot of stock to absorb. if that's 3% of the outstanding shares, that's not bad, is it? >> it was down about 5% to 6% when it was first announced. it bounced back since then. >> so with that dow is down 10. let's get to pisani to see what's moving on the floor. bob? >> a little weaker today. the 10-year-year-old above 2.9%. if you look carefully, a lot of them are more interest rate as soon as -- sensitive sectors,
utilities are another one. the other big question is whether we've seen any relief rally here and whether that stole the thunder from the santa claus rally that's supposed to happen in the next few days. initial reaction is very, very mild, considering we have a rise in interest rates. we have huge volume, a very strong advance decline line yesterday, better than 5-1 here at the new york stock exchange. it doesn't get any better than that in terms of technical under kateo -- indicators. big volume is coming tomorrow. art mentioned this earlier but we have the quadruple witching expiration and the nasdaq rebalancing. nasdaq only rebalances. the buybacks are going to be really big. they're reducing the share count in the s&p 500 by about a half a percent. so it's really mattering. these buybacks are impacting the
overall market right now here. the s&p rebalancing is going to be large tomorrow. we're going to have general moltomol motors with a big buy. they're going to be selling apple and exxon because apple has had a huge buyback program and so has exxon. you'll see share buybacks and that will reduce the wait persian gulf in is a brilliant moment for facebook to announce the secondary, because when it goes into the s&p 500, there will be far more demand than the 70 million shares announced. separately the fed will do an unusually large permit operation today, where they go into the market and buy instruments, buy treasuries. they're going to do this in two operations, at 11:00 and 2:00. normally strock traders don't pay attention to this. i bring it up because it's very large and traders are wondering if it's going to impact the market around 2:00 eastern time.
finally, the big debate on 2014 is whether there will be any real increase in capital spending. credit suisse named increasing in spending as one of the big themes in 2014. let's hope that's not the case. when you look at general electric, their annual meeting yesterday, what i saw there was a lot of cost cutting, i saw talk about dividend hikes, talks about buybacks, improvement in top line. i didn't hear anything about a notable increase in capital spending or spending in general. things are getting stingier, not going the other way. guys, let's see if that starts to emerge if the global economy gets a little bit better. guys, just down 14 points in the dow. >> thank you very much, bob. oracle the top gainer on the s&p up almost 5%. let's head over to the nasdaq and check in with sheila on those opening moves. >> the nasdaq is opening in the red this morning. the nasdaq 100 down about 0.3%.
the number one reason the nasdaq down today, facebook. that 70 million share sale offering having a big impact on the trade. that's one of the reasons we're seeing the nasdaq down. tesla is nothing interesting stock everyone is talking about today, the company responding to the fact that their charging system didn't cause a fire. bank of america putting out a very skeptical note this morning about battery life. in fact, in the report it said they are skeptical the battery technology will improve enough to make mass market electric vehicles viable. that's a big mover today as well. finally i want to talk about biotech. biotech is holding up today but there is one big loser and that is vertex pharmaceuticals. one of their drugs didn't make it when it came to phase three so that stock is dropping. paychecks is winning and that's one of the big winners on the
nasdaq today. kayla? >> a lot to watch there. keep us posted throughout the day. we'll shift to the bonds and dollar. rick santelli at the cme group ha has that for us. rick? >> thanks, kayla. it not very warm in chicago but it's hot, hot, hot in the bond market. we're getting into territory that's somewhat unique from a pricing vantage point. here you go. let's look at a september 1st chart of 5s. the winners yesterday, we have a new guy on the block because we had an auction of 5s and it's hot. basically high yields. and let's look at the 10-year, it's also hot. let's keep with this theme 5s and 10s because on the 5-to-10 spread, some massive flatten ing. we can all talk about the
steepener or du jour trade, it is -- a flat i don't knowing curve is not what they want to see. they doesn't want to see short rates under performing. that kind of goes against the plan. can you see it going hot on the same tightening with respect to flattening 5s to 30s. now let's switch gears back to the fixed income market, sovereigns. let's look at what's going on with the bunds. september 1st, they're hot. gilts, they're hot. one is prochgfessionaling 1.90,e getting close to 3%. all you correlation guys out there. and if you're short the end against pretty much anything, it happy days. where were you? '62? 62-month high on the dollar versus the yen. we can talk about how all the other currencies are trouncing that currency as well. carl, back to you. >> rick, thanks a lot. we'll see you in a few minutes.
>> when we come back, an exclusive with the ceo of carnival. but first, facebook's run-up takes a detour as the social network announces a stock offering and zuckerberg sells tens of millions of his shares. what one analyst thinks you should do with the stock when we come back. (vo) you are a business pro.
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welcome back. social media giant facebook offering up 70 million shares. stock down about 1%. not as bad as it was doing in the premarket now that it is open for trading. it's set to join the s&p 500 so dilution today will be set for demand tomorrow. do you find this to be good timing? >> i think it's great timing. if you do the math, the delusion fr -- dilution from this offering is around 1%. so even without it being included in the s&p 500, we think this is a very good deal for investors still.
>> zuckerberg is going to take profit on about 9.9 million of the shares that he's selling. it stills owns about 62% of the voting rights. what do you make of the optic to this. are they worrisome to you? >> it's always nice when the founder or the largest shareholder is selling in conjunction with the company and the old adage being take the money when you can, not when you have to. one thing that i don't think should be forgotten here is we're ten days before the end of the quarter and in my -- in our opinion, this is really the best indication that the business is actually going really well, considering the royal screw up they had on the ipo, i think the last thing they need is to create more ill will with investors at this point. so i think this is actually a good indication of what the business fundamentals are doing. >> the company overall is going to net about a $1.5 billion from the sale. where do you think they put that
money to work knowing that it's just before the end of the quarter and they've got a lot of strategies to roll out next year? >> well, put that in perspective. they already have $10 billion in the bank and they have no debt on the balance sheet, right? so 1.5 billion is a lot of cash for a lot of people. i don't think it's really going to change their strategy around m&a. again, i go back to what i said earlier, i think they see a great opportunity to take the money at very, very minimal dilution. they're doing it. we've seen other companies like google do that like three months after they go public, saw linked in do it five months after they go public. as long as fundamentals support it, the stocks keep going up. >> it took investors -- with google that, came around a lot earlier in the cycle. nonetheless, today we're going to get a rollout of video ads.
have you had a peek of these? and what do you think? >> we've only seen the tests they've shown on the site. our respective news feed haven't seen it. we're seeing video ads but not the auto play video ones. the incidence of these video ads in general has gone up pretty dra m dramatically. >> you have add 63 price target and buy rating on facebook right now, it's at $55. any changes to that? you still affirm that? >> not really again. so far the quarter has been tracked fairly well, we think. we'll see whether between now and when they report we have enough data points to, you know, to justify increasing our estimates and our price target. but if there is a bias, it will probably be more towards that than the opposite.
so we continue to like it and it's actually one of our top picks for 2014 as well. >> all right. thanks so many for joining us today. >> when we come back, bitcoin rebounding a bit after that tough start to the week. where is it going next? we're going to ask one of the few analysts on the street who covers the virtual currency when we continue. dow is down some 21 points. hat'e 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. life's an adventuren do and it always has been. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use
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bitcoin losing momentum after hitting that high a couple weeks ago. the virtual currency has caught the attention of even wall street analysts. darren, good to see you. good morning. >> thanks for having me. >> this news out of china earlier in the week in a obviously threw a huge roadblock in bitcoin, is that a one off? >> i think it's an interesting piece of news. i don't think it's necessarily one off. bitcoin is an industry, it's called a currency which will be watched more and more increasingly by countries around the world. i think china is an area that was growing pretty dramatically. the government decided to step in and keep a closer eye on it for now. i bet we're going to see more to come. >> as your coverage has
initiated, you said huge disruption, potential disruption. the success in your words is binary in nature. it's sort of all or nothing, isn't it? >> to some extent i think that's right. you basically have a number of different issues you have to watch out for. more importantly, though, it's really just watching how the volatility in the currency works. that could be an inhibiting force for consumers. if we can get past all that, the next step is regulation and regulation may level the playing field to some extent but overall it's somewhat binary. >> i'm fascinated where you're coming at this from. you published this after you had lunch with the manager of public
market. it's almost like the view from within silicon valley. is that correct? >> i think that's fair. there's a definite force within silicon valley hoping for this to be successful. i cover visa card, mastercard, western union and zoom. on one hand this is a great innovation and a great way to make payments move faster. on the other hand this is something we have to watch closely for potential disruptions to incumbents doing things their way, visa, mastercard or others. >> i think the jury is out at this point in terms of how you refer to bitcoin. you call it a currency and others have called it a commodity, possibly regulated by the cftc. how do you define it first and second how do you begin to regulate it? >> from our perspective, it is a currency, it's meant to be used
on e-commerce. bitcoin and other digital currencies, you don't need to way t plus one or three days for your cash to get across borders. you don't need to pay certain transaction fees. that's a benefit here but it's a currency mover. >> what do you tell merchants who say they're starting to accept this? >> i'd say just make sure you understand the volatility in it really. while at some point it could very well get to be and become a larger part of the ecosystem, right now you can buy something or sell something for a thousand dollars that might be worth 500 just because of the currency tomorrow. >> darren, thanks a lot. >> coming up on the program, an economic triple play, breaking news on phil little fed existing home sales and lei, market reaction after a big surge on yesterday's fed news. [ male announcer ] the new new york is open.
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go dave. when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. welcome back to "squawk on the street." we have a recent read. december philly fed. and that business outlook is a bit light versus expectations. it's at 7. we're looking for 10. our last read was 6.5.
if we look towards leading economic indicators, up 0.8, last months 0.2, subtle revision down to 0.1. the big story is interest rates and poststock rally. but for existing home sales the month of november, one person, washington, d.c., diana olick, what do you see? >> reporter: rick, down, to a seasonal adjusted annual rate of 4.9 million units. that's a big miss, the street was expecting 5.1 million units. existing home sales in november were down 1.2% year over year. that is the first year-over-year drop in home sales in 29 months. why? dropping affordability. that's a problem. look to the west where sales fell 8.5% month to month and down 10% year over year. that's because prices jumped
16.5%. that is slowing sales. the median existing home price nationally, $196,300. that is up 9.4% year over year, but that's the first time in a year we have not seen double-digit gains nationally so prices are starting to ease as sales drop. inventories were down but up year over year. we're seeing better supplies in the market. again, it's that affordability issue and very tight mortgage underwriting. still 32% of home sales were all cash. that just tells you how tight the mortgage market is right now and it's getting even tighter going into 2014. so again, a big miss down 4.3% for november existing home sales. >> diana, thank you very much for that. the stock market is putting down, certainly the down after that massive 292-point surge yesterday in the wake of ben bernanke's news conference. stephen woods is chief market strategist with russell
investments. bill stone joins us, chief investment strategist with pnc asset management. thank you both for joining us. bill, the data here looks relatively soft. does that change perhaps just at the edge your perception of what ben bernanke said yesterday? >> you know, maybe a little bit at the edge but i think while you're going to see some coming off of maybe some very strong housing numbers, at the end of the day when you look at it in absolute terms, housing affordability remains very strong and what ben bernanke did talk about is the fact that employment seems to be picking up and if employment continues to pick up, if that's the real trend, in the end people will be able to afford to buy homes. i think that's the crucial part of the puzzle. >> there was an "if" in that, if employment continues to pick up, which i didn't expect to hear from you, bill. >> no, we still remain positive. i didn't mean to hedge on that.
i do want to say if you look at the key to kind of the bullish case on things, i do think that remains the real key. >> steven, you're a chief market strategist. what strategy have you got? >> well, we're looking at the fed as being accommodative for the foreseeable future. i think the fed has picked up the pieces of that september surprise and they've educated the market that there's a big difference between beginning to taper on qe and a rising rate environment. and i think speaking about housing, as long as they don't see a pernicious backup in housing rates that could stall housing, i think that would be important to them. also, we think there is going to be a glacial improvement in the labor markets. nothing great but it is improving. i think now the fed wants to maintain a very accommodative stance and in that we think it's going to be an okay year, 2014. i think investors still look to safe haven as being risk assets that are not going to return a
lot so we look to equities, to high single digits in the u.s. and a cross multi-asset strategy that they're going to need. >> do you think the fed is going to start blowing bubbles, and if so, should people buy them? >> i don't know necessarily that i'd place at the feet of the fed any bubbles that necessarily start. i think it's human behavior. i don't know when that's going to be. i do hesitate -- i wouldn't play them. >> let me point something out. the people that are not professional investors will be very mindful of and the surveys show that. we're at a record high here on the stock market yesterday. we surged to a record high. everybody thought ben bernanke was great. but what the man was actually saying was i'm still going to print $75 billion of money next month and force feed it into the economy and i'm going to keep interest rates at zero for two
years. so that doesn't paint a picture that really would reassure an awful lot of people on main street and yet the market is at a record. you don't see those two as being in violation of each other? >> i don't. at least not right now. i think people throw around the word bubble a lot. when you look at the valuations of stocks, i have to say to you they're no longer extremely cheap or anything like that but i'd also say they're not extremely expensive. so there's no way in my mind you could call them a bubble. they're somewhere in the middle and frankly stocks spent a lot of time somewhere in the middle. >> that's a good point, simon. i think right now with the markets where they are, this fair valuation, security selection is going to account for a lot more. rates historically speaking are still not all that dangerous. security selection, stock picking, clients and investors, they need to go through this market with a fine tooth comb but there are opportunities.
it will just be more challenging. and you're right, the fed is dialing down the medicine but they are not discharging the patient from the hospital any time soon. >> thank you for the analysis. >> the federal reserve will trim monthly bond purchases on an improved outlook for the u.s. jobs market. we're going to discuss that right now. it's interesting, frank, you look at the jobless claims number out this morning. it was up slightly. the fed yesterday indicated interest rates will be low for a longer period of time than i think the market expected. do you think people who are saying the gold trade is over are wrong? >> yeah, i've always advocated that you have 10% in gold and gold stocks and you rebalance. this year you'd be buying gold at a pe ratio lower than the s&p and this big correction and still over ten years that model has worked well. what is important to take a look from a year ago in gold as a
currency is that you look at what's real interest rates, what are they paying you above a 10-year government bond? a year ago it was a negative interest rate. the five-year was a negative real interest rate. with the cpi coming out this past week, when you look now in the capital markets, eight positive rate of return on ten years and five years and that's always put pressure on gold. so do you think inflation is just going to stay at 1.2% when you just commented that housing prices are up 9% over the past 12 months? >> but the long-term story is obviously different than the short-term one. i'm looking at gold at los ws o the day down under 1,200, which goldman said would be the low for golds. it does seem it's breaking through that level. in the short term what would you do? would you still keep 10% in your portfolio? >> absolutely. i all advocate rebalancing at year end. this is a time to rebalance. you'll take spectacular profits off the s&p 500 and russell 2000
and nasdaq and buying gold stocks at historical -- pe ratio cash flow all-time lows. >> i'll be really honest with you, frank. you are the only person when i see your name in a program rundown, my heart begins to race. the reason it begins to race is you continually come on this network and tell people to buy gold and that has been the wrong thing to do during the course of this year. it almost breaks my heart. it's down 30% this year. and still you come on and tell people to buy gold. do you not have any compassion for the people who watch you? >> simon, simon, you had the u.k. and bullish selling all their gold and they left 10 billion on the table back in london when i spoke with you. so, please, don't go down that path. what i've always advocated is a diversified portfolio and having a 10% waiting in bullion and gold stocks has been prudent.
>> even, frank, when you look at the year over year performance, it's down nearly 30% this year. that's not a good performance when you look at the overall equity market that's up that much. >> yeah. and there's a whole not process with diversification in bonds and much more money wiped out in people paying all their money in bonds in the past year. look at the capital market and total dollar amount. when you look at a 10% waiting and rebalancing each year, in fact the overall portfolio is up. so, simon, have some compassion for asset allocation and rebalancing, simon. that's what's important. and there's more money lost in apple computer for retail investors than there's been in gold. >> the difference between you and i is that i'm not trying to sell a product. frank, thank you for your time. >> i sell asset allocation, simon. asset allocation. >> indeed. have a good holiday, frank. have a good holiday. >> stocks are down this morning
after that massive rally trading yesterday. now that the fed taper has officially begun, what should you watch for? more in a moment. plus shares of facebook down this morning after the company announced it will conduct a secondary offering of call it $4 billion worth of shares. much of that coming from facebook ceo mark zuckerberg. jon steinberg will tell us what that means for the social network later this hour on cnbc.
stocks are lower this morning after seeing that massive rally following yesterday's fed decision to start the taper. our next guest is on track with her expectations for a taper in the fourth quarter. what can we expect going forward? let's bring in our financial reporter from the post from washington, d.c. good to see you again. >> reporter: thank you. you got the first question in the presser and you heard everything that happened after that. what was the main takeaway for you? >> i was a little bit surprised that he showed some sort of surprise that we would think that the taper would actually begin and end by the middle of next year. i asked him what we could expect in terms of future additional cuts and he said he expects the program to continue through much of 2014. so we're going to be seeing additional $10 billion cuts, i think. they're going to take it very slowly. they're not going to try to pull the rug from out from under the recovery.
the fed wants to make sure they're actually seeing the improvement they hope will occur next year. >> today of all days, four out of five indicators miss, a miss on existing, claims the highest since march and so on. is that going to matter? i wonder if they truly are data dependent, would they have to reconsider jumping in? >> the fed has given themselves an out. they said they can skip a meeting or two. they said they are looking for significant improvement in the outlook for the labor market. not that things are necessarily gung ho today but that things will get better in the future. even though their forecasts for 2014 have not changed significantly in terms of economic growth, what you're seeing is that the context that those predictions are being made in is completely different of the fiscal crisis is not going to hit again until 2015, the housing market, sad numbers
today but starts yesterday were strong, you're seeing improvement there. the headwinds for the economy are fading and that clears the path for the fed to start to act and when the economy has finally taken off, then it can slow the program. >> we have to give you credit. we thought taper was imminent and you said, no, i think it's a december story and it came true. what is your best guess as to the trajectory policy takes over the next 12 months? >> i think that janet yellen is going to be very much in line with ben bernanke. he said he consulted with her closely even before she was nominated to be his successor. but i think one thing to really pay attention to will be what happens to forward guidance. ben bernanke was very careful in choosing his words in saying he doesn't expect an imminent change to forward guidance but left the door open for them to tinker around with that 6.5% threshold and possibly adding an
inflation floor. the language they added in december yesterday alluded to that but i think there could be more significant changes down the road. >> is there a sense that yellen's hands have been tied to a degree because this tapering did occur before she officially took charge of the committee? >> i don't think so at all. i think, again, that they have been working very closely. i don't think that he would have made this move if she had been vehemently opposed to it. indeed he seemed to suggest that there was actually quite a bit of support for this strategy going forward next year as opposed to the close call that we saw in september. so i think that this is something that she will be able to carry out in the future but not something that she's opposed to. >> and finally, it was interesting to hear bernanke -- i think his words were something to the effect of it could have been a lot worse had we not acted the way we did, which struck me as the closest he would possibly come to some sort of victory lap yesterday. >> when the fed ends qe, they
want to be able to say mission accomplish. and there's an idea the fed has been uncomfortable to get out of qe and some fed figures have raised those concerns. but overall the fed wants to say this program worked and when they finally pull back, it will be because the economy is stronger not because they're concerned with the cost of the program. >> interesting day yesterday. of course the story in some ways is just beginning. thanks so much. >> thank you. >> we'll see you later. >> the numbers are out. insurance institute for highway safety announcing the safest car for 2014. we'll tell you who took top honors when "squawk on the street" returns. the american dream is of a better future,
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welcome back to "squawk on the street." i'm dominic chu. two food companies are out with bearish news. we'll begin with darden restaurant, which has been under pressure from barrington capital because of falling profits. the stock is falling as they report a 40% decline in profits. red lobsters reported a 4%
decrease sales. barrington capital, which represents shareholders that own about 2% of darden shares has said in the past the company had become too large to compete with rivals. then there's also mcdonald's. its japan unit plans to close 74 outlets in the country as it cut its full-year forecast by more than half in its second largest market. sales have fallen for five straight months in the region. japan is 50% owned by mcdonald's and shares of mcdonald's are down about 2% in the last three months overall. let not forget, remember that might ey wings promotion? apparently they have an overstockpile of them and they may bring them back at a discount to get rid of that mighty wings overage.
>> the numbers are out for the safest cars for 2014 and u.s. automakers are falling short. phil, over to you. >> reporter: when they put out their top safety picks, they added a new category, top safety pick plus. these are the front overlap, the front, the side, the rollover, the testing the roof strength and there are more of those that have met the crash standards. eight models have earned top safety ratings after missing the list last year. what's this new category, the higher category of top safety pick plus? 22 models are on that. the majority of those are foreign-made brands. just it would have the models come from u.s. domestic automakers. japanese automakers clearly dominate this list. what stands out about these models? they have collision avoidance systems.
not only do they have the crash test results that earn them a top safety pick but they have the collision avoidance systems so that that feature, which is increasi increasingly popular, will help them avoid collisions all together. and one last thing, guys. i want to show you shares of toyota. why are we showing you this? the toyota camera has earned a top safety pick designation. this is important because it didn't have this designation in the past. now that it has it again, consumer reports is once again recommending the camry. it was a big deal last year, guys, when consumer reports said you know what, if you can't pass the crash test standards for the iahs, we're not going to recommend it. that has changed and it's now on the recommended list. back to you. >> let's stay within the automotive sector. we welcome the largest auto parts maker in this country, johnson controls. they also manufacture car batteries and hvac systems and is forecasting 2014 earnings now below estimates. shares of johnson controls still
up nearly 70% over the last year. here at post 9 for his debut is alex molinaroli. it's his first interview since becoming c.o. of the company in october. welcome. >> thank you for having me. >> it must be ceo and see your stock rise by 25%, give and take 20% a share. but now the narrative is changing slightly because you've warned. where are you in relation to the business? >> i wouldn't consider it that we warned. it's been an incredible rise for the stock. unfortunately i can't take credit for that. as we move forward, our earnings are strong. it's the top line that's under pressure. we want to go through and make sure we hit our numbers and give numbers. we know we can make. >> so how do you respond to that? >> there are companies going through a lot of changes.
we're a large automotive supplier and we're also in other businesses. we like to think of ourselves as multi-industrial. unfortunately the world doesn't see us that way. we're looking at how much we emphasize the automotive sector because of volatility and there are other great businesses we will highlight and invest in. >> the automotive sector has played such a great role in the consumer recovery. there's an idea you guys could spin off the automotive business. why would you do that and how do you view the ongoing recovery there. >> the way i would think about it is the automotive business has been great for us. the last 20 years it's made us the company we are. the outsourcing wave driven by automotive companies has been good for us. it's become commoditized and the
business is very tough. we have great business in you're storage and hvac business. >> is the narrative changing on auto overall? ford has a lot to do with it. is it worrisome? >> i don't think it's worrisome. if you have options, which we do, you have to make choices around capital allocation. you can choose to invest in automotive. we're in an up cycle now. but if you look at the long term, this company has made its 128 years it's been successful being in multiple industries and i think it's an inflexion point for us. we don't want to get out of the automotive business. we just want to make sure we're not an automotive company only. >> but you do manufacture batteries, charging systems and there's been a lot of talk about tesla and one of the charging systems in orange county. elon musk has come back fighting
saying there are many more fires and accidents caused by gasoline than by batteries and our products. but how do you feel about what tesla is going through and what advice would you give to musk at this point? >> i don't know that i'm qualified to give him any advice. but i think his business is a little different than ours. if you look at the tesla business model, it's very much a niche market from our perspective. we supply one third of all the batteries for automobiles in the world. our view of the market is a little more mainstream. he's had some technology at this point that may not be economically feasible for the mass market. we serve the mass market and as the market moves, we'll participate more but i just think it's a different business model. >> as your story unfolds, will you come back and see us regularly? >> sure will. >> alex molinaroli, the johnson controls president and ceo. thank you. >> thanks a lot. >> take a look at facebook this morning. the shares are slipping off the lows but still down 1 1/3% after
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>> the draw was more than expected, average estimates looking for a draw between 260, 264 billion cubic feet. let me put that in context for you. clearly we are seeing a spike in demand for natural gas products. last week the draw down was 81 cubic billion feet. prices, we're seeing a 2% spike ahead of this number and continuing to spike now at 4.37 at the moment. i did speak to one analyst who told me there is a little bit of caution when we see this kind of demand. there could be a setup for disappointment. the forecast calling for colder temperatures so we'll be watch being these prices very closely. carl, back to you. >> wow that, is a move. >> facebook announced this public offering of 70 million of its common shares, including 41
million by mark zuckerberg. it is expected to go towards satisfying taxes. joining us, jon steinberg from buzzfeed. >> he's got a huge tax bill. i'm trying to be a little cheeky here but it's sort of the taper of secondaries. it's really small on a market cap basis. it's being added to the index at the end of the day tomorrow. it's the right time to basically do it, i think. >> yeah. someone said it's a brilliantly timed move from an investor relations perspective. >> this is a company that historically has done a lot of things wrong with wall street. the cfo's office gets a lot of credit for timing it. he's using it to pay taxes, a lot of it is going to charity.
>> when do you start to get worried about the flow, about major dilution over time? >> when you look at a $4 billion offering at a company worth 400 billion at this point, we're not even worried about it. well above 5% you might get concerned but certainly not now. >> why does the company need to issue shares. >> because he has to pay the tax bill -- >> separate from zuckerberg. >> why not. when they made the teen engagement comment. i think when it ran after earnings, they said let's take a little air out of this. this is not a company that wants jacked up stock price, they just want to keep things calm. >> they say it's the company taking advantage of this. the two-pronged approach is
positive. >> that's right. he had to do the tax bill, had to do the stocks, let's put it together, give some to charity, raise some capital. let's get it done the week we go into the index. >> let's talk about video ads. we've talked about cpms, which for those who don't understand ads, it's the amount you pay for thousands of customers. in video it's much different than any other kind of ad. >> yes. >> when does that start to show up on their bottom line? or ad sales line? >> the u.s. television advertising spend is $60 billion to $70 billion. youtube's video revenue will be $5 billion to $6 billion. there's a giant, giant delta there. brands love buying video advertisements, tv advertisements because it's super easy, sight, sound. and facebook wants that, they want to get out of just selling social ads and go for the giant
ring of tv budgets. >> would you tailor this to roll immediately as you scrolled or if you wanted to hear it you'd click on it or do it differently? >> there has to be reciprocity. you watch television at night, the commercial runs. people have to pay for the content in some way. ultimately it's starting to play without sound. it's not that bad. can you ignore it. if you have a slow connection, it might not start before you get past it. >> do you think the comps are there just yet? is facebook going to be an ad killer against some of the competitors? >> the easiest comp is the youtube comp. why don't we have the youtube video dollars? that's a relatively small bucket. the next bucket is sell on the grp basis, the way you sell television. they're pricing $2.5 million a day. simon? >> you know you're beginning to
sound like a member of the establishment, don't you? reciprocity, we're giving you a free service, you should watch our ads. come on, that's not how it works. >> i love i'm the establishment for once. i do believe that. i don't think it's that interruptive. with no sound it less interruptive with television. you're right, teens are not going to like it. >> the extraordinary thing is facebook is now the establishment because it's going into the s&p 500. how young is facebook and it's going to be in the s&p 500. >> it is staggering. when they star doing these things which are a little establishment, making people watch a video ad that starts playing, it opens the space for people who don't have to hit the revenue targets, now we're going to disrupt them. >> have you always worn a tie or is that new as well? >> what's new is i knew it was the holiday, i opened up my closet and i've worn the same
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welcome back to "squawk on the street." check out shares of winnebago. the stock is getting hammered despite the company reporting a 51% jump in quarterly profits due to its higher demand for its motor home. they are benefiting from increased consumer confidence but it looks like investors are selling on the news, the stock up 24% over the past three months. more and more people rv'ing but not enough to get the stock to the up side.
>> a new york council prepares to vote on an e-cigarette ban. opponents argue that the measure could force nicotine addicts back to traditional cigarettes. joining us here, miguel martin, a maker of ecigarettes. this is a big threat to you. this is a big thing that's happened in your space so far. it's not just new york. l.a. and chicago is considering these bands. how are you responding? >> it's strictly not based by fact. even by the testimony provided by the health commission and city council. there's no science on what they would describe as environmental smoke. you have people from the lung association who say this may play an important role for cigarette consumers to find an
alternative. so we're disappointed in the city's position. chicago has deferred their proposition because of the outcry from business people and consumers. >> in fairness to the lung association, i believe they have said that less harmful isn't good enough and they're arguing it's effectively a trojan horse to avoid smoking bans and will get more people addicted to nicotine. that's the issue. you're going to make smoking visible and possibly sexier, and that's going to attract people into what is not a 100% safe activity. >> i would disagree with that. 99% of the vast majority of users of electronic cigarettes are adult smokers. we only and market and sell our products to smokers. we don't do television or glamorize or attract others to our product. >> do you have in your product
anti-freeze? it was found those were in e-cigarettes and harmful to people. >> the chemical is propylene glycol, it's a binder found in many consumer products out there. as pertains to the chemical, we as a company implore the federal government and cdc to do the studies. but as a company we're doing many things voluntarily, discontinuing flavors, not advertising to children, trying to work with the fda and even in new york city we were fine with the proposal that it be a 21-plus product like cigarettes. so i think to try to bring this back to what the cigarette wars were of say 20 years ago and say we're trying to be irresponsible is unfair because many companies like ours are really trying to do the right thing and are actually working with the fda on regulatio regulations. >> we talked to some council people and asked where is the policy being driven from. when the smoking ban happened, it was bartenders and waitresses
who had no choice but to work in these establishments. who is asking for it? any idea? >> i think it's the council members. even in the testimony, to go back to your point, it was about the workers, bartenders and waiters and waitresses. when we asked the restaurant association of new york, they said we don't have an issue. when you see the product, their big point is confusion. we're trying to enforce a combustion based smoking ban. you don't see a visible smoke coming out of the flavor of it or even the odor of it. no one's confusing that. >> this is also being regulated on a per establishment basis. london's heathrow airport has an e-cigarette lounge. just like smoking sections in the days of yore. what would you say to that? >> if a business owner wants to say we want to ban e-cigs, i
don't fight that. but if someone wants to have adult consumers use the product and if the city without any science is going to take away that right, i think that's what's faulty. the important thing is we want to work with them on this issue. this isn't us being obstinate trying to be difficult. we want to take it out of the hands of the kids, we don't want it to be flavored. by their own admission, there's no science behind this regulation. >> just leave us with one stat. if there was one statistic on how much your business has grown this year, what would you put out? >> we have more than tripled our business, we're the second largest company in the u.s. the u.s. e-cigarette business this year will do $1.7 billion. i come from a tobacco company. i think it's the most exciting thing that's happened. the margins are better and the growth is better. >> miguel martin from logic technology, thank you. >> you're very welcome. thank you. >> when we come back, this man is always fired up when it comes to the federal reserve.
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the street." . check out sales of conagra. they reaffirmed their guidance to 2014. they're committed to merchandising programs with customers as it sees those programs positively up 6% in ea trading. kayla, back over to you. >> quite a move, dom. thank you for that. in the meantime, it's that time again, the "santelli exchange," hey, rick. >> hey, kayla. well, welcome to the friday eve edition to the "santelli exchange." i think we'll call it gps thursday, and not for global positioning, but for a couple of different reasons. gold post shifting with respect to the fed thresholds, triggers, unemployment levels, time horizons, or we could call it government parenting, or parental syndrome. either way you want to go, once again, you know, we had a -- not really a taper, like the game of
"horse" when you play basketball, we have the "h" and i think it will be a way before the taper basketball gets the final completion, where you get the last sholt and you win. the gps that i referred to will have an effect on the marketplace. one is the fed funds. the futures, in particular. and i'll tell you why. there's a lot of interest that if you look at fed fund futures, that you are going to divine when the first tightening is going to occur. mm, as i look at the curve for fed funds, you know, maybe it's march, maybe it's april/may of 2015. maybe it's 2016. maybe it's 2017. we can't tell. the goal posts are moving. but the point is, the fed fund futures really are not very good at picking that fulcrum point of raising rates. they're not very good. since that contract's been around, we've had a few cycles going from tightening to easing,
and vice versa, not very good at picking the first spot. but there's another issue when it comes to fed fund futures -- you know, basically you have one every month. but the problem is, even once you begin the trend of an easing or tightening circle, if you go too many meetings back, sorry, it's not the great predictor. what you need to do, normally when you get close to a meeting, look at that and maybe the next one out. now, we're going to talk about something else that really hits home for me, and that's the flattening of the yield curve. if ever there was a doom's day trade, the doom's day traders that the yield curve, the upward sloping, has some hiccups in the short end where rates go up. i call it the lehman doom's day trade. the world revolves around short-term funding, repos, commercial paper, and we know how that turned out. and it's one of the few government programs, fed programs, that i loved, the commercial paper program. but we have seen a lot of flattening going on, because the five-year's getting a little unruly. is it too early to worry about
it? absolutely. is the fed happy about any flattening? my guess is no as the mentality of the fed's control keeps shifting from the short end, and it gets smaller and smaller in terms of the territory they can protect. so we want to monitor all of that, watch the five-year close above 1.65 today. back to. >> rick, thanks a lot. see you in a little bit. this is big news for the football fans. the s.e.c. is considering repealing the blackout rule, which, as you may know, keeps tv companies from airing local games if they weren't sold out a few days ahead of time. super bowl winning coach brian billick is here to weigh in on that when "squawk on the street" comes right back. tdd#: 1-888-648-6021 there are trading opportunities tdd#: 1-888-648-6021 just waiting to be found. tdd#: 1-888-648-6021 at schwab, we're here to help tdd#: 1-888-648-6021 bring what inspires you 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.
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and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. the national football league is protesting an fcc proposal to end the controversial blackout rule which allows for the league to cancel a football broadcast if the home team can't sell enough stadium seats. i want to bring in brian billick who won a super bowl ring as head coach of the baltimore ravens. i joins us this morning on the new% line. coach billick, good to have you. welcome. >> thank you. >> i'm just curious, as a coach, as someone who actually worked for a franchise, if this rule made sense to you when you were in the league and if you were a
fan of it. >> well, from the franchise standpoint, stadium participation, getting the fans into the stadium, even though the nfl is the most, you know, successful and participated-in by way of fans, in all of professional sports, it's the envy of professional sports, getting the fans to come out to the game, given the experience they can now have via their television sets, there's so many different avenues, it is an issue. and this is something the clubs are having to grapple with, and if, indeed, this were put into law, i would think it would be a very definite hit for the national football league, because it's an issue they're having to address now in terms of making the stadium experience something worth coming out to, fighting the parking, paying for the expenses, everything that goes along with going to a game. when you can sit at home and enjoy the same experience, if not better, to add this on top of it, i think it makes it very difficult for the nfl. >> yeah, anyone who goes to games knows exactly what you
mean. the fcc says, look, it's been around for 40 years. back then, game ticket sales were a much larger portion of revenue for the league. now it's a lot different. is that true? >> well, i'm a little uncomfortable with the government telling me how much my profit margins should be, and what i should be charging for my product. i mean, i don't think that's anything for the fcc to talk about. i could make the case that back in the day when there were only the three major networks and there was a limited -- that was the time to not have a blackout rule, because you really didn't have any other options. you either went to the game or you didn't. now, there are so many different avenues, so many different affordable packages, you can get the entire nfl in your home package if you want. it's not like the local package and, yeah, the locals would like to see that it get broadcast normally, but there's so many different avenues right now. i think the fcc is the one that needs to kind of be drug into the 21st century and recognize what the landscape is. >> coach billick, as expected,
the nfl has already been protesting the fcc decision, saying that this is unfair. you mentioned margins. a lot of people are talking about how this could dilute the fan experience. what do you fear if this actually happens? >> well, it's not a matter of being fearful. it's the fact that, again, this is -- these are companies that have the right to charge what they're going to charge to make their product available as they see fit, particularly when there's a market -- there are other options. if there were no other options, if they were locking out the fans from a broadcast standpoint and giving them no other options but to go to the stadium, then, yeah, then i think it might be a different perspective. but as i said before, there are some different avenues that the fans can access the game if they choose to that i don't think it's right, i don't see where the fcc has the right to insert itself into the business of the nfl when there are so many options. this is not a monopoly. i don't see -- i don't see the value of this.
i don't see why they're addressing it. >> finally, coach, 10 seconds, your picks for super bowl? >> yeah, the teams that win the afc and the nfc championship games. [ laughter ] >> good one, coach. thanks for your time today. >> all righty. >> brian billick joining us from maryland. if are you just joining us, here's what you missed earlier on. >> announcer: welcome to "squawk on the street." here's what's happened so far -- >> for the first time in four years, we have a budget. you know? we've been operating the largest economy in the world on a month-to-month basis. crazy! >> if you think you know the consumer better than anyone, then you're in trouble. so we keep a close watch. you spend time in stores. but i think the consumer's the most difficult part of our job, getting the product right and figuring out when the consumer will like it or not like it. >> the first part of the year, we think the s&p 500 will exceed the 2,000 number, and then at
some point, thing also overheat and the fed will be the scapegoat for some sort of a pullback early to midyear, but the bull market continues. [ bell sounds ] >> there's the bell. >> we think there will be an improvement in the labor markets. nothing great, but it is improving. so i think right now the fed wants to maintain a very accommodative stance, and in that, we think it will be an okay year. >> you look at where we are, now is an up cycle, but if you look at the long term, this company has made its -- it's 120 a year, successful being in multiple industries and an inflection point for us. >> he had to do the tax bill, sell all of the stocks. they said, let's put it together, in a bunch of different things, give some to charity, raise capital, as well. it's rounded-out, rather small-type thing, so let's get it done the week we go into the index. >> announcer: the "squawk on the street" countdown to christmas is in full swing. ho ho ho! ♪
good thursday morning. we're live at post 9 at the new york stock exchange with a check on the markets, of course, after the big 292-point rally on the dow yesterday, a more moderate action today. the dow is down 15, s&p down almost 5. darden restaurants is the biggest decliner on the s&p. the restaurant chain announcing plans to spin off or sell red lobster, and reporting another quarter of sliding profits. take a look at gold, too. big hit in the wake of yesterday's fed tapering announcement, a six-month low below $1,200 an ounce, as really weakening with inflation, little reason in the view of some to buy. a roadmap for the morning goes like this -- the morning after the taper announcement, one of the fed's biggest detractors speaks out. we'll speak with ron paul in a few minutes. and carnival has a better-than-expected earnings report. is the worst over for the cruise operator? whole foods' big greek
sellout. they'll stop selling chibani yogurt. we'll get the reaction from the ceo. first, we're watching the markets, the major averages in slightly negative territory after a day of rallying on the news of a taper. let's bring in richard bernstein, and also a cnbc contributor and ward mccarthy, with jeffries. gentlemen, welcome. rich, i'll start with you, we're seeing a little bit of a breather today in the markets. the fed was cautiously optimistic yesterday. we got a lot of negative data this morning. what do you make of it? >> well, you know, i think the fed yesterday pretty much endorsed our view that we're entering a midportion of the cycle. you know, cycles kind of follow a shakespearean script -- you have an early portion, midportion, a late portion. and what's very interesting is people just don't believe there's a cycle during this cycle, despite the fact it's been playing out as a very, very normal cycle. and so, here we are, that's the midcycle? the midcycle as the starts the reversing policy. you have rising interest rates,
and it's a tug of war against the improvement in fundamentals. guess what we saw yesterday? it was a perfect midcycle day. bonds sold off. interest rates went up. the stock market went up almost 300 points. classic midcycle day. >> ward, a $10 billion taper taking equal amounts from the mortgage -- mbs purchases and also the treasuries. some are saying it's more symbolic than substantive. when do you think that picks up based on what you see? >> i think the fed is going to determine the size of the tapering on a meeting-to-meeting basis. they've been very encouraged with the data over the past six weeks. as bernanke pointed out, they were encouraged that we've generated 2.9 million jobs since the asset purchases started. and the other factors that i think are important is that physical headwinds are going to be severely diminished. we actually have a budge ot for two years, which is a relief to a lot of people, and the market
conditions are improved relative to september, which is when some people thought the fed would start tapering. so i think the fed's going to continue to monitor the economy. i think tapering will last at least into september of next year, because they're going to take it slow. >> rich, we had yolann yui on from the "post," and she said the fed wants to say mission accomplished. can they say that? >> no, the jury is still out when it comes to whether it works out the way one wants. i think it will say, ward's comments are important, because it's been our view that the fed will be very reactive to the data. i think that's what they're trying to say. and if this doesn't work, it will become an intermittent progress. i think the point that the fed is trying to make, and my guess is ward will agree with this, is the fed is trying to tell people they won't prematurely end this cycle. and i think that's the important
thing that came out yesterday. >> rich, tactical moves for 2014. i'm thinking back to the playbook you gave us earlier this year, looking at domestic companies, looking at the russell. what will work well over the next 12 months? >> you know, carl, i mentioned it in our view, we're entering the midcycle. and the midcycle tends to be dominated by capital spending-type stocks, so that would be, in our book, industrials. we like small cap and midcap domestically focused industrials. we're very big believer in the american industrial resanaissan. you can't play that with multinationals. so small and midcap industrials. and then, traditional technology. not the sexy technology, which is kind of an offshoot of venture capital and nothing -- nothing based in reality, really. but traditional technology is very cyclical and tends to do well in the midcycle. >> all right. rich ward, we'll leave it there, but we'll check in with you guys in a few months and check in on your picks, and we appreciate
you being with us. >> thank you. >> thank you. former gop presidential candidate ron paul vocal when it comes to the fed, and with the taper timing in place, what does he think now? he joins us from texas. congressman, good to have you back. good morning. >> thank you. nice to be with you. >> i know you're never really happy with the fed, so to speak, but are you more net happy with the taper in place now? >> well, yeah, but it's so little and so late. you know, they're still going to buy $900 billion, that's the rate they're buying. so in some ways, it's a little schizophrenic. they say they'll taper, which means they have to buy last, and people kcan interpret that as tapering. you have to buy stuff to keep interest rates from rising. short term. but they're still in the business of manipulating the most important price in the economy, and that is the price of money. the interest rates. as long as they do that, you'll have gross distortions, and
you'll have days like yesterday where, you know, the market goes up 300 points and wall street's jubilant, at the same time today we hear that the people applying for unemployment went up about 40,000 more than anticipated. >> right. >> so there's still instruct as you recall -- structural problems in the economy, and regulations by the congress, as well. >> do you think 2014 will be the year of inflation, or not? >> well, i think we're in the year of inflation. i think it could be more inflationary than, you know, quadrupling the monetary base. and a lot of people say, oh, no, we only go by the cpi. well, first thing, cpi is not reliable, but, you know, even if you did, you have horrendous inflation. yesterday, you saw inflation. what the fed -- >> you mean in the markets? >> what the fed doesn't have control of, they can create money, and they want general prices to go up, but they can't control it. so the money went into the stock market. that's inflation. they buy bonds, that's
inflation. we mess around with government medicine, and we pump up all of the prices of the cost of medicine, that's inflation. we pump money into education, those prices go up. because economists argue that inflation is increasing the money supply, and you can't predict where it will go. but there's always a distortion, it goes into debt. debt is inflated. look at what the government does on -- just because they tell the people -- and people believe it, and for that reason it has a market effect -- the cpi doesn't go up, somebody says, well, it's great. as a matter of fact, they made that same argument in the 1920s. they said, well, prices aren't going up, so there's no distortions. >> right. >> so we have a lot of distortions that will be ironed out in time. >> the inheriter of the distortions, as you call them, congressman, will be janet yellen, expected to be confirmed by the end of the week, and expected to be the person to fully unwind the quantitative easing program. what do you think of janet yellen and what do you think she
will do with this program over the course of the next year? >> well, i think of inflation according to the popular opinion about the cpi and something like that happens, where the economy goes into a recession, which i expect. that would be like saying to janet, "boo," and she is not going to cut back anymore, because she believes even more strongly in inflationary policy of the fed printing, buying than even greenspan and bernanke. so, no, i think that this whole policy of pretending they're having major changes and not buying quite so many bonds and buying short-term bills instead, that could change in a minute. it could change before the end of the year. who knows? before january, there may be some conditions that they may even change this purchase, or it won't last very long. but it's up for grabs. the fed is powerful. they have a lot of things they can do. but ultimately, they don't have
the control, just like now they want people to spend money, and all they do, they spend the money on stocks. so they're not as powerful as they think they are. >> right. >> but we still suffer the consequence of the distortions that they create. >> i'd love to not stir the pot or anything, but i'd love to get your take on what bernanke was asked yesterday about fiscal policy, and in his words, he said people don't appreciate how tight fiscal policy has been in this recovery, tried to argue that on a local government employment basis, much different than the last recovery. do you agree with that at all. >> >> well, you know, i've heard that for so long. every fed chairman has -- when you push him on their difficulties that they're having on managing the monetary affairs, they say, well, congress is always the big problem. either they're spending too much and may have to monetize the debt, or they're not spending enough to help out monetary policy. so in a way, it's sort of a game that they play. neither one defend the market. i defend the market.
i don't like fixing interest rates. i don't like debt. i don't like government spending. i don't like overregulation. and they work together, and the politicians love it. because even though they may on occasion complain about the fed, the people who run up deficits, you know, need the fed. so they work hand in glove to take care of all of the spending, just like the other day with this great, wonderful compromise, what they did was they got rid of the sequester. but they agreed on this. i mean, they want more money spending on wars and overseas and increase the spending by $60 billion. so i wouldn't call that very much austerity. >> congressman paul, i know we have to end it here, but i'm curious, where do you have your money invested? you don't seem to like any sector that we talk about here. i'd be curious where you are bullish. >> well, i -- i invest in my businesses and in property and real things. so i don't buy regular stocks. i guess i'm too chicken, you
know, because when i look at the stock market, i don't think it justifies what's happening there. and i think right now is rather dangerous for somebody to go out now and say, hey, look at what they're doing. if cutting -- if tapering helps the stock market and they'll have to taper more, let's buy more stocks, i wouldn't do that, no. i'd like something more of real value. i like reasonably good real estate and make my best decisions based on that. >> at least you're a man of your word. dr. ron paul, we thank you for being with us today. >> you're welcome. >> all right. now, let's send it over to dominic chu for a quick "market flash." dom? >> thanks, so carnival is moving higher. they posted a small but surprising fourth quarter profit as it continues to try to turn things around following mechanical problems and fires on three ships earlier this year. the number of passengers it carried was 3% higher than it was the same time a year ago. in a cnbc exclusive, the ceo,
arnold donald, will be on "squawk on the street" in the next half hour. so, carl, we will definitely be tuned in. back over to you. >> all right, dom, thank you very much. now that the fed has begun tapering, what's the best way to play the banks and financials? we'll talk to dick bove in a moment. also, rick santelli in chicago. rick, what are you watching? >> well, you know, mortgages are still a big deal, part of taper is $5 billion on mortgages. we'll talk to a new guest, vincent, talking to him not only about mortgages in general, but some of the mortgage reforms and some of the crazy ideas we thought were dead, like eminent domain, and they're not necessarily dead. this will be a fascinating interview in about 10 minutes. join me. hi honey, did you get the toaster cozy?
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>> thank you, dom. we'll certainly will be watching. big banks getting a boost after the fed announced it will taper earlier than some expected, but what will the long-term be? dick bove is from rafferty capital markets. thank you for being with us. you look add the market yesterday, the big banks led the rally, and stowed they're lagging the market. some may be digesting what we saw and thinking this might not be a great environment for banks, but what do you think? >> well, i can't think of a more perfect environment for banks. think about it. if interest rates go up, that means their net interest margins widen, and that's positive. if this is all happening because the economy is a bit better in places like housing and autos and capital spending, everything about this midcycle talk, that means more loans. if at the same time we'll see a shift in funds away from the bond market to the equity markets, then that means more trading, it means more ipos, it means more m&a activity. at the same point in time that the revenues will be moving higher, the banks will be going through this period of
controlling their costs that they'll be getting positive leverage on their banking -- on their income statements. i think banks in 2014 will earn $50 billion net after tax, which would be an all-time record, and i think bank stocks will go to 1 1/2 to 2 times book value, which means the world couldn't be better for banks than it is right at this moment. >> we haven't seen the valuations in quite sometime, but explain to a viewer what happens with the current rate environment. low rates for the short term, higher rates in the long term. what does that do to the yield curve and how does it affect the bottom line of the companies? >> well, basically, banks are paying virtually nothing for money at the present time. i mean, if you have a bank account, you're well aware they're not giving you anything for the money that you've got on deposit. as interest rates go up, you know, the banks will charge more and more for the loans that they put out, and because they have a lot of adjustable rate loans on their balance sheets, the rate will go up on existing loans. they're not going to increase
the amount of money that they pay you for deposits. so your deposit rate is going to stay very low, and the rate on loans is going to go higher. that's going to expand the net interest margins, which, of course, will contribute to higher earnings. >> you know, there's some sort of fracture on the buy side, though, dick, when people are trying to think about how to interpret this into putting their money to work. i was e-mailing with a bunch of people, anton said buy bank united because of loan growth. other hedge funds saying buy citigroup, because the emerging markets weren't hit as hard by the announcement yesterday. some still saying best story for growth is actually bank of new york, mellon. what do you say at this point? >> i think they're all right. okay? i think in the case of bank new york, mellon, because it has over 50% of its balance sheet in cash and government securities, any increase in interest rate also have a dramatic impact on its earnings, and that means that the same is true for state street northern trust.
i think it's true that, you know, regional banks will benefit, because essentially they sell real estate loans, and if the ability to sell more real estate loans increases because the housing market's a big stronger, because personal lending is a bit stronger, because home equity comes back, then regional banks will benefit. and if it's true that we're going to see a big increase in m&a activity and ipos, and that that's going to pull up trading, well then, companies like, you know, morgan stanley, goldman sachs, and, you know, bank of america, citigroup, will all benefit. so i would argue that all three of these guys are exactly correct. you just should be buying bank stocks at this point. >> finally, dick, we have not mentioned regulatory risk, the degree to which it's more difficult to do business, loans take longer, big story in the "journal" about goldman and how the bar has been raised in terms of the only business initiatives. do you ignore that in 2014? >> well, obviously, the
regulators are totally out of control, and they're doing everything possible to cripple the american banking industry at a time when we need the american banking industry to be supporting lending. i don't expect these guys to ever get rational. they're a bunch of hysterics that should be driven out of office, in my view. but the point is, you know, if the industry is going to get incrementally $50 billion in net income, that net income will be put to use to get a higher return. but i can't think of one positive thing to say about american regulators. they're driving risk into the financial system. they're putting us in a position, will there be another financial crisis? they're a disaster. >> dick, thanks a lot. dick bove. we'll see what financials do over the next few months. when we come back, an exclusive interview with arnold donald, the world's biggest cruise operator did beat the street. is the worst finally over for the company, when we return? clients are always learning more
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surprising miss on existing homes today. the lowest level in nearly a year. so now that the fed has officially begun tapersing, where does housing go? rick santelli is live with some answers. >> yeah, carl, you brought up a great point. existing home sales go southbound. we have starts and permits for the most part going northbound. we see interest rates going northbound. i guess, vincent, being the first time on, being a housing expert, in your opinion, summarize how healthy or the extent of the improvement in housing, and then do it through the prism of rising rates. >> okay. i think that what we've got is basically a very, very fragile housing market, even though we've gone up about 13% insofar as housing pricing, if you will. but it's fragile. if we get interest rates up to the 4.5%, 5%, on the 10-year, we'll shut it down completely. in addition, you have legal issues out there, and other things that i'm sure we'll discuss later that will shut the
housing market down. we have to be very, very cautious, very cautious, as to where the 10-year goes. >> in terms of just reforming the industry to get the banking sector and the securitization back and running, i don't see a lot of significant reform. but i still see old, dumb programs that seem to be still out there, even with said housing improvement. the one that comes to mind is eminent domain. you've testified on this. tell us your thoughts. >> here it s this is probably the worst idea since -- pick the worst idea you could possibly pick, this is a bad one. what this does is basically takes and rents some group of san francisco bankers out there trying to rent cities eminent domain power to take performing mortgages -- not nonperforming -- performing and take them away from the investors. who are the investors? they're you and me, the investors are the 401( 0 01 k o so take them at a discount, and make a profit for mrp and their
investors. in fact, in january 2012, jeffrey gunlock asked them to leave his office, because he basically told me, to raise money from one of investors to harm another. he said, have you ever heard of reputational risk? please leave. so that's what i feel. and it's been a bain of my existence and the -- >> well, you think it's unconstitutional. i don't disagree. but i think it's unconstitutional for revenue bill to start out in the senate, and one could make a case after the supreme court ruling by mr. justice roberts, that that's what happened with obamacare. >> exactly. >> are we going to find a test case to get standing in front of a judge on this eminent domain issue? >> there already is a case out there now, wells and deutsche bank have brought this bank, along with 18 different investors, and the folks have all -- they're waiting because the case wasn't right yet. however, in our offices last week, barney frank said he doesn't think the eminent domain thing would ever, ever pass the
supreme court muster. >> wait a minute, you're telling me i agree with barney frank on -- in that case, i'm going home, and calling it a day. thank you for your first guest appearance, vincent. kayla, back to you. >> thank you so much, rick santelli. coming up, the leader of the greek yogurt craze in the u.s. is getting booted by whole foods. the ceo of chobani gives us his reaction. plus, the european close when we come back. stick with power. stick with technology. get the new flexcare platinum from philips sonicare and save now. philips sonicare. hmm. mm-hmm. [ engine revs ] ♪ [ male announcer ] oh what fun it is to ride. get the mercedes-benz on your wish list
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>> announcer: the european markets are closing now. >> and as crazy as the markets have been for us and as green as the arrows were for us yesterday, more green arrows as both asia, to some degree, and europe follows suit. the stocks over there finishing the day in rally mode. reacting positively to the fed's tapering announcement, did get some nice u.k. retail sales. take a look at how london, paris, germany, italy, spain did finish the day, a series of green arrows. let's bring in bob pisani with a look at what's moving here at home on the floor of the new york stock exchange. bob, over to you. >> well, i want you to notice that the stock market is only down a little bit here, and i want you to show the interest rate-sensitive stocks, because that's the group getting hit a little bit, as the 10-year moves toward 2.9%. the emerging markets, the eem, now down about 9% on the year. reits, the reit index, it went negative today on the year so. we're down maybe 2% on the year. utilities, telecom, homebuilders, a little bit of disappointment in the earnings today.
but okay on the year. much better in the first half of the year. what i'm really looking for, are there any signs the stock market is panicking about this? i don't see it. take a look at the vix. once again, the vix is down today. we are near the lows for the year. not far. we're not at 'em, but not low for the lows of the year. the vix measures volatility, fear, one month out, so we'll be quiet for the next few weeks, higher later on. it's not. look at the futures contracts in january, february, march for the vix. those are low numbers. 14, 15, 16. i barely pay attention to the vix when it's under 20 at this point. i have been looking for panic. i do not see it right now, at least not in the options market, as far as equities goes. let's move on here and talk about earnings. okay. not worry about what's going on with the fed. let's look at earnings. this month, analysts have lowered estimates on 2,400 of the s&p, but the magnitude of the cuts are very, very small. they're not lowering the estimates that much. down 2, 3, 4 cents. the bottom line, putting up the
next screen, i'll show you what's going on for the fourth quarter earnings situation. the magnitude of the downward revisions has been declining. it's getting better, slowly. 2013 is a record year for earnings, we'll be up 5.5%, revenues up about 2%. big thing we all want to see, of course, next year, guys, is some improvement in the revenue situation. if the economy improves, you will see that, as well. i think fourth quarter will not be as bad as a lot of people think on earnings. back to you. >> all right, bob pisani, thanks a lot. as you know, the long-awaited fed taper is here. but now that it is, what's next of the federal reserve? steve liesman is live in washington with the answer. hey, steve. >> hey, carl. a lot to think about now that the fed has finally tapered, the building behind me still standing, the federal reserve still standing, wall street still standing. we survived it. a lot to think about, including inflation and the fed's forward guidance. first, i want to show you what next year's projected qe schedule would look like. it's taking down $10 billion at every meeting, taking bernanke
at his word, saying he would adjust, though, according to the economic data, but that's how we end up at $5 billion in december. what does that mean? you total it all up, and you get $460 billion, which is pretty close to our cnbc fed survey of $497 for next year. a little adjustment, maybe a little more aggressive. but then, take a look at the interest rate forecast from the federal reserve. little remark yesterday among the big interest rate sequester -- qe news was that the fed brought down its outlook for the fed funds rate from the december -- from the september meeting to the december meeting for both 2015 and 2016. taking about a .25 point off, or 20 basis points, and another 10 off for 2016. now, the fed chairman, ben bernanke, was asked about inflation, and he said one of the reasons why he doesn't think it will go down, may even go up, is a lot of one-time items go away, and there are other reasons. >> you look at the fundamentals
for inflation, the inflation expectations, whether financial markets or surveys, or if you look at growth, which we now anticipate will be picking up in the u.s. and internationally. if you look at wages which have been growing at 2%, and a little bit higher according to many indicators, all of the things suggest inflation will gradually pick up. >> ian shepherdson from pantheon picked up on that, the forward guidance in our view is likely to be severely tested over the next year as the pace of economic growth picks up. investors will become increasingly nervous of the risk of being on the wrong side of a change of heart by the fed, especially if wages pick up, or lift core cpi, inflation much above 2%. carl, the game has changed. we've gone off of taper watch onto guidance watch. so we'll be watching the guidance for whether or not the fed is sticking to that zero percent into 2015. >> well, after half a year of taper discussions, steve, i think we'll take it. we'll take any kind of new
discussion. steve liesman in washington, great stuff. safe travels home. >> thank you. when we return, this has all of the makings of a greek tragedy. whole foods announcing it will stop carrying chobani greek yogurt next week, because it contains gmos. the ceo of chobani will respond after a short break. [ male announcer ] here's a question for you:
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on a special edition of the "halftime report," coming up at the top of the hour, some of wall street's best investors are here to open the 2014 playbooks. how about this? dinan, cooperman, lazry, pisina, guys at the top of the hour. >> that's just showing off, scott. we'll see you in a few minutes. >> as the dow is down a few points, we'll talk to the ceos of chobani and carnival cruise lines. we're aig. and we're here. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays.
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the nation's biggest high-end grocery chain and the hottest greek yogurt brand are parting way. whole foods says it will stop selling chobani for brands that are organic or do not contain gmos. for a first cnbc interview, is hamdi ulukaya. and it's great to have you back, hamdi. >> thank you for having me, carl. >> you said this won't hurt your business, but help us understand this can be anything but negative. >> well, you know, even though we don't like it, you know, every store, every consumer for us from day one is very, very important. so i don't like it, of course. you know, chobani has, you know, founded on the belief that good food, good yogurt for everyone,
so we are available everywhere in the country. the business we have with whole foods is less than .5%, and we grew about 30% this year, and we wanted to grow more and more places, not less places, of course, we don't like it. but, you know, since yesterday, i was at the plant, and when i heard the news, you know, of course, i took it personally. gmo. first, they said it was gmo, and then it was changed to be more exclusive, you know, specialty products. you know, on the gmo front, there's information, even some of their products have gmo fat cow feed, so that's a definition that needs more attention, more understanding. but when it comes to yogurt, thinking that yogurt should be exclusive, that i don't understand. it's not a, you know, expensive watch, or imported, why yogurt has to be exclusive, that i don't understand. >> it sounds like your take is,
it's just difficult to source, it's difficult to source at a suitable price if you, in fact, go on gmo-free milk. is that something you're working on? is that something you can accomplish? >> of course. you know, this is our founding belief. we believe pure, simple yogurt, or food, for everyone. that's our responsibilities. that's the manufacturing responsibility, as a farmer who comes from turkey, grew up with yogurt, grew up, you know, working on the farms, i am very close with the farmers. the reality is, 98% of the milk comes from the farms, they cannot find the feed that's not genetically modified. but what we can do, is get (unintelligible) out, and we asked them and we did it, the new york farmers, more than 800 farmers did not inject hormones into their cows now. i'm proud of that. and chobani is leading to make sure that when we go further, we make food better, milk better, farmers better, and everybody wins. and we are committed to that, and we'll continue to do that.
>> hamdi, one reason that whole foods cited being comfortable making this choice is that the number of options in this market that chobani effectively created has multiplied. how formidable is competition in this space right now? >> you know, i am proud of what happened to yogurt world in the last five years. and new look at the yogurt world, you know, five years ago, you couldn't find a decent yogurt to share with your kids and your family. if you're in upstate, idaho, wherever. you have to go, you know, specialty stores to be able to find it, and that i couldn't understand. i just couldn't understand why a simple yogurt, you know, has to be specialty. and now, we are staying independent. we stayed connected to our beliefs. and the consumer loved it, and that forced other companies to make better products. and if you look at the yogurt world now, almost 50% is greek. and, you know, people are more coming to the category. they're enjoying it, they're sharing it with their families. >> right.
>> and we have more to go. >> and a test -- >> -- a brand like chobani -- >> a testament to that, of course, is the billion dollars roughly in annual sales, hamdi, that chobani has. what does a decision like this do to your business? >> you know, as i said earlier, it's, you know -- it's less than .5% of our business. i don't like it, because i don't value the sales. i value the family consumers that can reach our products. i have a lot of e-mails and texts that come from our consumers, how much they love and where they buy it. and whole foods has started this good foods movement, and they're good stores, beautiful stores. and, you know, we've been proud to be a part of it, and we'd like to be so going forward. but nevertheless, you know, our plant's working 24 hours, 7 days a week, making delicious products for everyone, and will continue to do so. >> finally, hamdi, i assume you
have tried to take stock of the rest of the distribution change. should shoppers, consumers look for similar headlines like from whole foods from other vendors? >> you know, i am not very connected to what people think and what they do and every day. i am very much connected to my factory and in the plant with my people making good food, and we can go back home and be proud of what we make. i think one thing is going to change is the food world. you know, food -- good food is not a privilege. we should be making good food for everyone, and i think a lot of things will change like that. >> really quickly, that doesn't answer our question as to whether whole foods is an outlier or the beginning of many chains that discontinue carrying your product. >> oh, of course not, no. if anything, they're getting a bigger distribution on more and more stories -- stores, and
we're proud of what we have grown proud last year, over 30%. we have beautiful, innovative products coming out, and simply 100, the first 100-calorie yogurt made only of natural ingredients, a lot of good food coming for the kids, and we're excited about the marketing campaigns which, you know, with the olympic team, the super bowl. we are very, very excited. we're busy. >> hamdi, thanks for calling in. good to talk to you again. hamdi ulukaya, the founder and ceo of chobani. facebook offering a public offering of 70 million of its common shares including 41 million being sold by ceo mark zuckerberg. uncle sam could be the happiest about that. robert frank tells us why. robert, over to you. >> hey, kayla. president obama and governor jerry brown should both be sending to thank you notes to mark zuckerberg. as part of the deal, he's
selling $2.3 billion worth of stock, it's not cash in his pocket, but taxes to the government. most of the proceeds will go to pay taxes, that's because zuckerberg is exercising options to buy super voting class b shares and buying them at a much lower price than the current value. so he has a paper gain that's treated as ordinary compensation, therefore taxed as ordinary income. now, california, of course, taxing at the highest rate in the country, 13.3%, plus the federal rate of 39.6%. last year, he did a similar deal and paid about $1 billion in taxes. so between this year and last year, he could be paying between $2 billion and $3 billion in taxes. of course, he's still worth about $27 billion, so we shouldn't cry. this would make him one of the biggest taxpayers in america. the irs doesn't release rankings by taxpayers, it only gives us the average for the top 400. those top 400 paying a total of $16 billion in 2009. the latest period. the average tax bill then was $40 million each. so maybe they'll at least name a bridge or a highway after him in
california. guys, back to you. >> all right. thanks so much for that, robert. just like us, they pay taxes, sometimes in big order. when we come back, carnival reporting earnings of the morning. the ceo is going to join us after the break. my mantra? family first. but with less energy, moodiness, and a low sex drive, i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron. the only underarm low t treatment that can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling;
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the martin scorsese film "the wolf of wall street" hits theaters tomorrow, but if you want to know why, wait until then. jane wells spoke to the real wolf of wall street. hi, jane. >> hey, carl. the more things change -- well, for weeks, we've been seeing this. >> my name is jordan belford. >> long before the cameras started rolling and leonardo dicaprio was drinking, drugging and carousing, we met the real wolf of wall street. >> i had played the game of crime very carefully for many, many years and covered my tracks wi zest and zeal, okay? >> this is the real jordan, but this is 2007, as his book "the wolf of wall street" was coming out. as we were speaking, bernie madoff was still taking investor money, bear stearns, lehman brothers were still in business,
subprime mortgages were being issued. >> you have a million shares of stock, okay? or a million warrants. we get them through a new issue, some type of warrant, rights offering, a warrant offering, able to get long in the stock. then, we would pump up the price of the stock, either, okay, ourselves in the early days, and then afterwards, basically the rest of wall street would essentially pump the stock up for us, wittingly or unwittingly, like silent conspirators in the game, knowing they could sell it back to me at the higher price, and once the stock was at the higher price, we would sell it to the clients. it wasn't get them on the phone and rip their heads off and steal their money. that wasn't the message. it was, when you rip their heads off, you're doing the right thing, because the stocks are fundamentally sound and they're going higher, so your o obligation, fiduciary responsibility, to rip their heads off, buy, and die, cheer
and clap, yeah, we're doing -- >> so you were conning your own brokers. >> yes, exactly. >> belford owes $110 million in restitution. he's paid $11 million and change. he now makes money as a speaker and consultant, and you can see the entire profile, including an interview with his former cell mate, tommy chong, right now at cnbc.com. simon? >> jane, thank you very much. carnival stock is cruising after the company reported fourth quarter earnings that beat analysts' estimates. coming to us straight from the end of the conference call is a man engaged in one of the biggest turnaround jobs, arnold donald, the president and ceo of the carnival group. welcome to the program, sir. nice to have you back again. >> hey, thank you, simon. and happy holidays to you. >> and indeed. and it's a set of results that clearly analysts are enjoying. you've come through with a profit on the earnings per share, i think the revenue is ahead of expectations. the big question for everybody is how rapidly now do you feel
you're turning the carnival brand around? >> well, we focus just on the carnival brand, which is one of our ten brands, as you know, simon. the recovery has been strong. we've recovered 75% of the brand image, damage that had occurred after the incidents in the spring. our occupancy and yields are doing well ahead of what we thought they would do, but at the same time we do remain cognizant of the fact of a lot of capacity coming next summer into the caribbean -- excuse me, next spring into the caribbean, and we're being careful to ensure we can sustain the momentum. >> so the big thing, and this is for the whole industry, is the degree to which you can hold your nerve on pricing. i see you got the new ships, the royal princess, the stellar, but when you cut prices in the first quarter as so often happens attest last minute in order to fill the ships? because i see here, you are talking about a further, an
accelerating decline on the yield in the first quarter. >> well, we're looking at tough comparison, first half of the year to 2013. so 2014 to 2013. 2013, the first half was prior to the incidents that occurred, so we had really strong ticket yields in that timeframe. next year, we're still recovering from the impact of those. but concerning pricing going forward, we look for strengthening prices. only time will tell. and there will be a challenge in the caribbean. >> you know, i mean nobody -- nobody underestimates the degree of the challenge that you've got here, and the images of what the business has been through, be it through t the righting of the costa concordia, and i have to ask you how you are responding to documents that have been filed in a court in miami suggesting that a compliance notice report was sent to the triumph crew one month before it departed
galveston on february 7th, and it recommended spray shields be installed on the engine's flexible fuel hoses, and that there was a risk of leaks. what are you saying? how do you rebuff those headlines, which you'll be aware have captivated some interest. >> yeah, well, the one network that covered that story, this is a frivolous lawsuit. it's taken a number of things out of context. the actual reference to information that purportedly came off of our ticket contract, that's not on our ticket contract at all. it was something that was submitted in a suit to dismissal request by our lawyers. so the bottom line is, look, the triumph happened, it's behind us, we've moved forward. we stand behind our product. >> we get it. >> you get it, good. the coast guard is evaluated, and we're fine. >> we're rapidly running out of time, because the next program has to take to the air.
but in fairness to you, i want to mention before we let you go, not only that you will be the only advertiser or cruise advertiser on nbc during the sochi olympics, but also that behind the scenes, with the price -- >> yes. >> -- guarantee, you've reorganized senior management. in a nutshell, what does that mean for the passenger and the business? >> for the passenger, we've introduced lots of innovations on the ship for better guest experience. our people remain totally motivated and exceeding the guest expectations. what it means for guests, come aboard, you'll have a great time on any one of the ten brands and we look forward to servicing you. >> thank you very much for joining us. arnold donald, ceo of the carnival group. have a great holiday. in meantime, it's time for the "halftime report." ♪ welcome to a special edition of the "halftime" show. we'll be joined by four of the wo