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tv   Squawk Box  CNBC  November 19, 2013 6:00am-9:01am EST

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good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. kate kelly will join us from outside jpmorgan's headquarters with more on the story in just a moment. but first, we're going to start things out with the markets this morning. stocks retreating from record highs yesterday on bearish talkes from carl icahn. the activist investor said he had cautious on equities. he was speaking at a conference where he said he could see a big drop in stocks because earnings at many companies are driven more by low borrowing costs rather than strong management. the dow and the s&p 500 are both on track for their best year in a decade. the major indexes have soared by more than 140% since bottoming out over a year ago. in his third quarter letter to investors, jeremy grantham suggests we could see stocks explode higher than sink into a bear market. he wroes, my guest is that the
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u.s. market, especially the nonblue chips will work its way higher perhaps by 20% to 30% in the next year or more likely over two years with the rest of the world including emerging market equities covering even more ground in at least a partial catchup. but then he continues, we will have a series of of serious market busts since 1999 and presumably greenspan, bernanke, yellen, et al. will help happy. and we the people, of course, will get what we deserve. dow futures down by 11 points. s&p futures off by 2.25 points. it is worth pointing out that we have seen a super strong run since october 9th. we're going to continue to talk about the markets throughout the morning. but first, we heard to some of the morning's top corporate stories. >> thanks, beck. i wish we could get someone to look at his recent comments. i cannot remember in recent years him predicting we would
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get this far. he's always been pretty concerned, so i don't know. i don't know how to read that. we need someone to look in the last year and a half, two years, if he's ever said anything even remotely bullish. home depot is remotely bullish. 95 cents versus expectations of 90 cents. on sales of 19.5 billion, which was above 19.182. i guess, you know, we look at this as a consumer play, but also a housing play and i think given what you were just talking about with the fed, you were thinking that home depot has been doing pretty well with zero interest rates and mortgage rates where they are. and when people -- >> well, when mortgage rates went up, was it going to impact their sales. >> and because the old story is if you don't need a buy a new house, you're still improving your old house. which wasn't true. if you look back to 2009 and down to 20308 -- >> that would be --
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>> my house, we don't improve as much as we should. >> when you're knocking out walls and when you're consolidating an entire floor of a huge building on the upper west side of manhattan, you're going to need some help with -- >> one day we'll be consolidating. >> the false modesty gets old. >> home depot. >> this is pretty good. comp saels for stores, 81.56, the all-time high. >> u.s. same-store sales up 8.2%. and frank blake, he's been -- and he wears that bib. it's an apron. >> a bib is what you used to put on the twins. they don't wear bibs any more, right? >> they don't wear bibs. >> it's an apron. that's my favorite shot. and he doesn't care that he
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looks like don knotts there. the langone just gurns about him and he doesn't gush about some of the other guys that were running it for a while. >> we need some aprons. >> we've got those. >> did you talk about the earnings already? >> 95 versus 90? the estimate is up to what? 3.72 is what they're saying. >> and they already beat by a nickel, so that doesn't say much about the fourth quarter. if they take 3.72 and they beat it by 5, so they've got some money to play around with where they don't have to. we have those. they gave us those. i have one that says joe on it. >> i think michelle was in that day. >> was she, really? >> yeah. >> one of these days, i'll wear it in. but that's all i'm going to
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wear. >> ooh. ooh. >> don't turn around. >> scary. >> i won't turn around. i'll face the camera. but the guys back there are going to have some serious problems. >> jpmorgan, it is the big news. the $13 billion settlement between the justice department and jpmorgan expected to be announced today. kate kelly is outside of headquarters in new york this morning. good morning to you, kate. >> good morning, andrew. so this landmark $13 billion settlement is expected to be announced as you said by the justice department later this morning. and i'm sure many more details to come. we've obviously been expecting this agreement for about a month now. i think it was just a few weeks ago i was standing in this very spot after a number of exercises in brinksmanship, really, between the bank and the feds who were prepared to sue on at least two occasions i know of, but were called off of that by a phone call in one case from jamie dimon, later a meeting in washington, d.c. the settlement, of the $13
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billion, 4 billion of that goes to the federal housing finance agency. that was previously announced. another $4 or so billion goes to consumer relief. and that will take various forms. it will be reduction of rates in some cases, reduction of mortgage payments, maybe even a temporary holiday from paying mortgage payments and various other things directed to troubled homeowners. $2 billion of it is a built related to wrongdoing and that's a key point there. jpmorgan, i'm told, will not submit that. but a passit admission of wrongdoing. that's what we're expecting to see. the balance goes to other government agencies involves, attorneys general in california and new york as well as credit unions that will see some of those fund. that's the breakdown that we know of so far. moreover, this is a landmark settlement as we said for the justice department. this is by far and away the largest regulatory fine we know
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of. other recent examples are just in the low billions by comparison. i mean, you look at glaxosmithkline, you look at bp, of course, for the deep water horizon disaster a couple of years ago, they're much smaller than this. teen recent sac hedge fund settlement related to insider carry to carry the $1.8 billion price tag, that's not even close to this $13 billion. so clearly, eric holder, the attorney general, you guys trying to send a tough message to wall street right on the east of expiration of their legal ability to bring some of these cases related to 2008. >> thank you, kate. appreciate that very much. here is the one thing that i'm trying to figure out. why did the board cave on this scic washington mutual issue? >> the receivership issue? >> yeah. that to me was a crucial issue and by my reading of the language, they had a case. >> well, i have a couple of theories on that.
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for one thing, i think jpmorgan felt they couldn't afford -- they could only go so far in challenging the government here. there is a still a criminal aspect to this case and a criminal indictment they think would be devastating. whatever they could do to keep things smooth, and recent settlement on this face was crucial. the other point i would make is there's a bunch of civil litigation going on, including one case in particular that deals with similar issues between jpmorgan and other parties where they could end up potentially pursuing the funds you're talking about, which i think is just shy of $3 billion in a wamu receivership managed by the fdic. but it's related to sour loans issued back in the day by washington mutual. kate, the last question, we are now at about $17.5 billion in total. right? so we have the -- >> with jpmorgan's payments? >> correct. >> i think we're closer to 20,
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but you're in the ballpark. >> lets do this. kate, we're going to come back to you in a little bit. but in the meantime, we're going to get to jacob frankel. good morning to you. >> good morning. >> so i guess we all knew this was coming, but it too so long. >> the devil is in the details. both sides have to get this done. they've went on record saying they have this settlement and really it was about working it out. all the points that kate was addressing, those were the details.ultimately, i think this was a litigateble and triable case. but the bank could not go down that route. >> now i want you to look forward. what else is left? we have this other $100 billion of mortgages lying out there. there's a number of issues, the criminal probe which kate alluded to. this is not over yet. >> well, it's not over yet.
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i don't think there is a real criminal probe because this case, the civil cases would not have been settled if there was a bona gide belief -- >> did you not see what they did to sac capital? >> i certainly saw what they do the to sac capital. two bites of the apple. i do not think that's going to happen here. the target at sac capital was steve cohen. i think the outcome at sac capital was foreseeable if you look at all of the other cases that were part of the bigger sec capital probe. you're not going to have a situation with jpmorgan where you have a criminal indictment that turns the lobby of every jpmorgan office around the world into a state of the office health fund. you're tot going to shut down
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the bank. it's not going to happen. i think there is at least -- i don't want to say a handshake, but an understanding, we're not going to see a criminal case here. >> jacob, if you were called in by the independent director of the jpmorgan, so we're going to have a private meeting and we want to get your view on what the heck just happened here and how we should think about our own management and how we should think about them going forward, you would tell them what? >> i would tell them that this is a toxic, toxic, not a tough u.s. government, a toxic regulatory environment that's been created by the powers that -- by the powers that be in washington. i think that creates a very dangerous precedent. i think it would also highlight that this government cannot be trusted when it asks an institution to come to the rescue. i think there are terrible precedences that have been set here not only in terms of the numbers, but in terms of how the government went about this case. i even see other problems in
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this settlement. this settlement includes a social policy component. it includes an independent monitor that i think is being misused in this context. >> misused because? >> because it's not the purpose of an independent corporate monitor. an independent corporate monitor is intended for use where there are compliance issues, where there needs to be corrector measures imposed, not to handle what should be a financial institution's job wbl, which is to distribute funds. i think there are a lot of challenging funds here. ultimately, this is a business decision and it's an understandable business decision. no bank wants to be in the business of fighting investigations. there's still london wales. there's a lot more out there. this is about bringing closure to these cases. it's not about the management of this company.
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>> jacob frankel, thank you for joining us this morning. we appreciate your supperspecti. >> he been the double dip, the episode of seinfeld where -- >> it's double dipping. >> did you see him, he does it with like a chip, a salsa and thn someone at the party is watching and then he goes -- dips back in big time. they almost threw him out of the party. >> how do you feel if you go for the dip and then you try to take the other side of the chip? >> only with your family. you can't do that in a public setting. >> i do know what you're saying. i think that's legitimate. >> not at a public setting. >> i think that's legitimate. my mouth is cleaner than the entire area, mostly. >> no, no, no. >> and chip res too big to get it all on the first dip. a second dip is -- you don't enjoy your food without a second dip. but i'm talking about pig necessary a blanket. >> you see me at a cocktail
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party coming at the -- >> but two bites of the apple sounds like a movie in the '40s with rock hudson and doris day or something. >> i'm not cool with double dipping, but -- >> have you seen any seinfeld episodes? >> i have seen most of them. >> so if i use that, it will be some -- instead of a blank look, there will be some recognition for what i'm talking about? >> they ended like 15 years ago. >> it's on four times he night. >> i know, but it hasn't been in product production. >> it's a cultural icon. everything that can happen has been done there. and you can reference it and i will at some point. >> if it helps, i master my own demand. >> that makes me nervous. >> this squawk ward movement has been brought to you by andrew ross sorkin. >> this morning, the bank was drawn from a $2 billion listing by china everbright bank in hong kong. this is important, this story,
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i'm sorry to -- we were joking around a little bit. but jpmorgan faces a number of investigations, so getting out of that everbright deal, that was one of the companies that was on the list that it had gone in the business because of -- because of the connections. >> i have seen anything that takes you away from pointing out every possible inflation jpmorgan has ever been involved with, anything that delays you or obstructs you or just gets you off subjects. you notice that? you've got to get back to -- where do you bank? not at jpmorgan, probably. >> no. as it happens, where -- >> do you try to get a better geel or something if you lay off? right here, where is it? are you friends with -- >> chase. >> chase -- >> you're working for a lower interest rate. >> no. >> the layoff? >> i'm not working for asked the question. >> but i'm an equal opportunity.
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i also have american express and some of those others guys. >> oh, home depot. we mentioned it. home depot's third quarter results. oh, bribe nagel, hi. brian nagel is here. it's a hard line analyst at oppenheimer and company. it is good and is it above, do you think, what people thought in terms of how good it is, brian? >> well, good morning. i think this report leads -- is going to be very pleasing to most investors out there. there's nothing to quibble with her whatsoever. good sales growth, good expense management, good buyback, it's across the board, really good report here. >> and we immediately mentioned the bernanke. it's a better environment for housing. that's better for home depot. >> that's true. that's a big driver. but i don't want to look past a lot of the improvements home depot has made in the business model over the last few years.
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this is a much better run company today. so the argument i'd make is given how much better run home depot is, the company is now better able to capitalize. >> when you look at what you were measuring, how do you look at that? >> there's a lot of ways to look at that. i put a piece out to our clients to say the first time in a while, home depot is trading about a one to two multiple discount lows. essentially home depot stock has done nothing over the last few months. so i think that's why even more this is a positive for the stock price. >> you can see it in the stock price when the first word of tapering, you can see it there. and it all -- will it happen again when the fed is ever going to do that? >> well, my view on that, and i think that's more avenue knee jerk reaction? >> but the rates go up and we
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did see, even though it's from low levels, we did see the mortgage market cool off a little bit when we went up to 2.7%, 2.8% on the ten-year. >> i think the most things for home depoint, home depot has operated very well in climbing mortgage rates environments. >> really? you know, that's a new high, brian, right there that we're looking at, all time. >> yeah. i was just looking at your screen now. that's right. it's a new high for the stock price. and a $114 billion market cap. and when, you know, we see those guys, the founders, they're not spring chickchickens, but they't that old. that's pretty amazing and that many jobs and everything else. >> wa about fedex? >> that guy, too. >> fred smith was here on
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friday. >> brian, your name is very close to brain. >> a lot of times people misspell it brain. >> but it's not, it's brian. >> it's brian. >> and jumbling your last name, we could make some different words out of nagel, couldn't we, becky? >> i can't think of one. >> brian, see you later. >> thank you. >> andrew, what's coming up? >> coming up, oxford dictionary is unveiling its word of the year. find out if it's in your vocabulary. i bet it is. i'm not going to be surprised. but first, we're going to head to a break and before we do that, we're going to check on the national weather forecast. we have alex wilson this morning. >> hey, guys. cold is the word of the week for parts of the midwest. this morning, not too bad. we have 20s and 30s out there. today's highs, close to average. for chicago, 43 degrees. 40 in green bay and detroit. even tomorrow, not too bad.
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temperatures in the mid 40s for chicago and detroit, even throw to mid 50s for spots like indianapolis and st. louis. but the cold is coming. we're going to have two fronts move through, one brings in cold air. the other brings in much colder air and we will be talking about temperatures well below average as we head into the upcoming weekend. so get ready for it in chicago. thursday, your high still close to average in the upper 40s. by friday, low 40s, as good as it gets. and 25i a look at what heads our way for the day saturday. those highs will be only in the low 30s for chicago, mid 20s in des moines, low twints in minneapolis. we've got mid 30s in indianapolis. and chicago, our forecast as we head into the weekend average high, 46. low 40s on friday. mid 20s, that will be your high as we head into the day on sunday. thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail.
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welcome back, every. right now it's time for the executive edge. the u.s. default threatened, banks took stroid steps. jpmorgan alone has spent more than $100 million on consingsy planning for u.s. budget crises. in addition, many banks gave
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customers concession because of the crisis in washington last month. gentlemen, this kind of explains how big of a drag this has been just on business is trying to get ahead here. >> yeah. and no, look, i think this is the true drag on what all this means both to banks and then if you go out to look at all the clients, this is what must be happening behind the scenes. i know the writers of the story. i like them. i was un impreimpressed by what going on here. >> they're all hanging their heads now. >> i don't understand that -- it's like a made up number. it only comes from jpmorgan. the firm doesn't put its own number on it. it's coming from some unnamed -- >> we talk about the bigger -- >> but i think it's a big issue. >> i'll tell you what the big issue is.
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tell me what the issue is. >> the republicans get done with this last thing and they're like, do we need a third party? should we disband? and then out of heaven, this beautiful thing lands right in their lap called obama care. and now just get on the surf board. i don't even care if you stand up. hold on to the sides and just surf this baby. shut your mouth. if they do this again with what is playing out, every single gain the republicans -- they're talking about trying to pin obama care on hellry to hurt her in 2016. if they mess this up in three months and go back, there's no way they're trying to same thing again. >> you're saying there's no way there's another default. >> there's no way there's even the talk of it. if they do, they're as stupid as all their critics.
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let's see what happens. it's collapsing under its own weight right now. this is just the beginning stuff. wait until premiums go up. >> i don't think he's the person you -- you know, that -- i just want to watch them. yesterday i was talking about it. i do a radio show once in a while and they have to just be quiet at this point and -- just let this play out. wouldn't you? if you were a political -- >> yeah. i wouldn't do anything. >> it would have been nice if they did this the first time around except that they can say what was it that we were fighting for the first time? delaying obama care. >> ted cruz? >> you about you weren't going to defund it. that was never going to happen. >> no, but he's on the record and now he can say i told you so and here i told you so. >> but everybody was against that. the other more unbelievable flow was a politico poll about how
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many americans think that health care is a birth right from the government. and it reached up 25 points to a majority, 56% now say it's not an onus of the government to provide health care for everybody. >> and i think 57% in that poll were unhappy with obama care at this point. >> but no, it's not the government's place necessarily to be funding health care for every single citizen. >> there's a big issue of what health care is. >> i'll show you the -- >> is it just facing that or is it something more? tease what it's all about. >> is it care that prevent yous you from getting the same thing you get in an emergency room? >> people say health care is free in every other country. so there are a majority of americans now that believe that is not the role of the government to provide health care to everyone. >> i think this is going to take some time to shake out. we'll see what happens.
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>> if you get past the problems with the website, and that's an if, if you get there, and we'll see what happens come january 1st, then i think you have a few months and then i think you take another poll and see where people stand on it. >> well, we get lulled into this idea that the entitlement state is the only way to lifl in a civilized society. for a long time, there were people that argue that 7% should be enough for the government to fund the production of the company and to build infrastructure and to do the post off and to do things like that. it was never thought of that providing cradle to grave coverage for a person's life was -- >> but that's the government -- >> role. >> whether, you know, everyone is getting it. >> obama care is a -- >> titanium hit. do they make them out of titanium now? >> they do. i'm not kidding. >> what else do they make out of titanium? >> i don't know. >> knees. >> that's not where he's going.
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>> let me tell but the oxford dictionary's word of the year. are you going -- do you have any guesses? >> i see it on the bofl of the screen. the word is selfie. the frequency of the word has risen 17,000% from a year ago. you can probably thank anthony weiner for that. the picture a typically taken with a smartphone or a web cam and uploaded to a social media website. >> so it doesn't have to be a h her raldo selfie. >> no. >> will we be using this word ten years from now? >> the pope can take a selfish. it's not necessarily a bad thing, right? >> no, no, it's not a bad thing. but the idea that these common within a lexicon and then all of a sudden they're in the dictionary. >> google.
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>> as word of the year, the second contender was twerk. >> i believe it. >> that is a bad word, right? twerk? >> i thought selfie, because of weiner, i thought selfie was of your weiner. but it's not. >> no no, no. >> so he ruined it. weiner ruined it for all of us. >> although weinor looked like a pretty normal guy with bill mahr. >> oh, i thought you were going to say. >> no, he did. when he went, what is wrong with you? it was like, anthony, thank you. >> are you ready to vote for him now? >> he's too -- i've always that he was too -- >> i didn't like him long before he did any of that crazy stuff. it exposed him for the liberal
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hip credit he was. >> when we come back, we're going to talk about the major bull market run. the major stock indexes have bottomed out just over four years ago. we'll ask if there is more money to be made when "squawk box" returns.
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welcome back, everybody. another record close for the dow. but 16,000 is on hold for the moment, at least. joining us now so talk about the bull run is david blitzer, s&p's managing director and index committee chairman. peter buchar is analyst. welcome to both of you. would you have been trying to figure out if people should start to feel nervous at this point. peter, you will bullish at the beginning of the year, but now you say this is a hot potato market. >> i was a mild bull going into this year meaning maybe stocks would go up mid single digits where i should have been a raging bull. but i'm trying not to dilute myself to think this is based on growth. it's a hot potato market because if you're a short-term trader, you can ride this, but you better have one foot out the door. >> one foot out the door. so you're looking for a big drop.
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you're in the carl icahn camp? >> i don't know when. no one is smart enough when. for all i know, it can be 1900 in the s&p. i'm saying this is a very dangerous market when it's driven by the fed that has so disconnected the markets from the underliegs fundamentals. >> i said this off camera to andrew. i had dinner with icahn ten years ago, where the market -- he has been in the over valued camp about the stock market the entire time and as long as i know has never switched. if he will admit he doesn't have a -- the slightest clue about where the stock market is. and he could not have been more wrong ten years ago. and 12 years ago. >> much easier to see the market is coming down. >> i wouldn't listen to carl icahn about the overall stock market who is the last person in the world to listen to based on the conversation i had at dinner 10 or 12 years ago. >> you see, he hasn't changed. i think the first thing people would realize, if you were into stockes and bonds at the
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beginning of the year 60/40, you're 75/da right now. it's just the market movement and so on. and, yeah, i think it is getting ahead of itself and it is driven by the fed. but until the fed does what it did in may and says, oh wab by gosh, look what happens, we're going to have to raise interest rates, it will continue. hopefully they do ta soon because i'd rather have it stop at 18 than 19 or 2,000. >> by the time the fed does this, they'll taper because the economy is stepping in to pick up the slack. it sounds like we don't think that can happen. >> i think that is -- that they can expand their balance sheet to such an extent and just a trillion over this year. so now no problem, get out of this when things are good and it will be a smooth transition and everything is good. and i cannot see a free lunch with the extraordinary policies that they've taken and that essential there is a flip side to this coin.
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>> we've had lots of people for the last two years make similar comments. what happened in the past two or three weeks that you've pointed to to say, ahhh, this sentiment issue has changed now. >> in the short-term, you can never predict markets. i'm not saying the market is going to go down a lot. i'm saying the risk reward is getting extraordinarily dangerous. because of the separation. also there aren't any -- >> were we separated six months ago? >> well, no, it's more dramatic now. >> just because of the run up in the markets? >> yeah. from january 1st through october, the market cap in the aggregate is up about 4.4 trillion dollars. the fed has printed 850 billion. so it's quite a multiplier effect and the economy has generated about 400 billion of nominal gdp. so we can continue to say that yes, this is a fed driven, but we're now getting multiple impact on the upside with stocks. again, it's a risk/reward game i'm pointing out here. i'm not saying the market is
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going down in the short-term. i'm just saying it's getting more dress at these levels because the market is very expensive in my opinion because we're dealing with peak prot margin. >> the change in the sentiment is about the fed in the following sentence. over the summer, you have this argument between who's going to be there we know janet yellen and larry summers. and i think summers was the hard line guy in terms of his image. but in terms of his general thinking. everybody thinks to have decided that janet yellen is so much more dovish than bernanke is. person unanimousky would be a hawk. without any evidence whatsoever. i haven't seen anybody who has really looked at what she did on the fed, what she did as the san francisco fed. >> so you don't necessarily thinks she's as dovish pass market expects her to be? >> no. we all think we know exactly what each fed chairman is going
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to do and we all get fooled. peter, your thesis is based on profits not rising because if we're at a peak of profit margins and they're headed down, you might be rietz. but based on pure metrics, we've had a lot of people come in here .historically the valuation aren't out of walk to any great degree. and we've had people for two and three years, i can name some names saying profit margin ves peaked for productivity. >> they have squeezed everything out. there's going be no more profit margin increases, commodity prices. so that's been a thesis of these people that have been bearish all along because valuations are not historically that high, right? >> taking a snapshot, but -- >> well, you're saying forward earnings aren't right because forward earnings are right. we haven't missed earning hes. >> i think if you're doing valuations, you have to do them on earnings you've already seen.
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>> but what i'm saying is it's not the multiples. you'd have to be long profits for this to be expensive. >> right. and the multiple basis is using the shiller cycle that takes into account the ups and downs cycle. according to that, the piece 25, which is above where -- >> is it robert. >> yeah. but it's not -- >> but in his first comment was at what level? >> oh, in 2000, i think that multiple got well north of -- >> that's 5,000. >> that multiple is high, it is above average. maybe it's good that we're starting to talk about a correction again. we have people talking about a correction a year ago. and then they went away, right? now everyone is saying, no, you have to buy this market. just hold your noiz nose because of the fed. now the cries are getting louder, which means it has more to go. >> you have to keep it around the bond market.
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to me, the ten-year yield from here is going to determine whether stocks are on the cusp of something like that or more. because whether the fed is tapering or not, the bond market will be the judge on of that. >> guys, thanks for coming in. >> thank you. coming up, the stories you need to watch in the day ahead. we have a report that perhaps the unemployment rate was faked before the 2012 lekz. tdd#: 1-800-345-2550 trading inspires your life.
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welcome back. it's time for today's "squawk box" planner. this morning, quarterly results from best buy and dick's sporting goods. we just heard from home depot earlier this hour.
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microsoft, they're going to hold its annual shareholder meeting in bellvue, washington, this morning. this will be steve balmer's last meeting at the helmet. also we'll hear from the apple-sap sung trial. and that is your "squawk box" planner. joe. >> thank you, andrew. thanks for pick that music, too. can you play that again for me? >> do you like it? >> yeah. >> it's almost like a price is right or -- >> no, i think it's like the medical network where they actually pay to try to sell someone to someone. and this is the music that you can -- can we play it again? >> what can you sell me? sell me something. >> i can almost see the guy with the synthesizer, da, da, da, da. >> it's like a game show.
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it's a game show. >> i mean, really, not everything bothers me and it's not monday. >> i can't believe this is only bothering you. this has been bothering me for months. and you just now are weighing in. no, we've talked about this before. >> i think it takes away from your credibility when your over there doing that segment, andrew. >> thank you. i'm going to talk to the higher ups about that. >> here is a story here. on a jobs friday, in september 2012, the unemployment rate surprisingly dropped from 8.1% to 7.8%. rick santelli questioned it on squawk. i did a lot of sort of tongue and cheek questioning and then jack welsh, famously tweeted that the number was the product of manipulation by the white house. now there's a report in the new york post. it is a john crudell report that is census faked the 2012 election jobs report.
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it claims that surveyors conducting the household survey were pressures to fake the survey in order to fill in data gaps when it was difficult to get adequate response rates on its surveys. and i talked about whether we make a big deal out of this or not. and i'll tell you the problem, in my view, is that it it was 7.8% then and it's 7.3% now. so it's continued to go down. so where is there's smoke, you never know whether there's fire, right? crudell has a guy's name. >> but this guy is saying they did it because -- since the labor department requirements consensus, i'm not saying he did it for political numbers, but -- >> no, they are age he was ordered to do it. >> this has not become a mainstream media issue. >> did you see the cover? >> that's a mob white.
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>> no, here's the problem. where is this story on the cover? if he thought this was going to change the world, this story you're talking about, it wouldn't be buried on page i don't know what, in the middle of this newspaper. >> no, wait a minute. >> nobody could read it -- >> nobody like cleavage more than the post. >> well, you put it on page two or three from the business section, maybe. >> he made up some of the surveys, but was never told how to hans some of the questions. >> you have to go find it on page 30. >> and it's crudell. i like john. >> i do, too. but i don't know if julius buckman has cleavage, so -- that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one. to help you retire your way... with confidence. that's what ameriprise financial does. that's what they can do with you. ameriprise financial. more within reach.
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"squawk box," it's global entrepreneurship week. joining us now jim finnigan. two of the co-founders and they come in number six on the list. so for those of us unfamiliar with it, what is it? what's the quick and dirty on sofi. >> sofi. >> here it is. >> we're an innovative peer to peer lender focusing on student loan refinancing. we leverage investments from alumni to reduce the cost of the loans that our borrowers take. >> so how much would a student pay for a loan from you versus elsewhere? >> it depends. we have fixed rate, variable
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rates, but generally our fixed rates go from about 4.99% to 6.75%. and they're refinancing from an average of 7% or 8%. generally save 1%, 2%, or 3%. >> are you relying on your alumni to have a giving back mentality if they're going to take a loan at that level? >> right. they do get a market rate return, because we think that borrowers were getting an unfair deal once they graduate and have a job, they're still paying the same rate that they normally would if they were a new student. so we can really give them a great rate, give a great return to our alumni and make some money in the profit. >> and will you give this loan to anybody? in any school? >> we started at stanford then expanded gradually, went to five schools, to 40 schools, we've been at 100 schools until the past weekend we were expanded to a lot larger. >> how can you afford to give your investors a market rate if if your loan is that much lower? >> well, basically the government charges the same rate when you take the loan out.
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you may have been working for two or three years, build up a good credit history earning a nice salary. you're paying the same rate you paid five years ago when you were much less credit worthy. we come in, refinance when somebody's more credit worthy and allows us to give a lower rate but give a good return. >> it's not necessarily a lower rate at the beginning, but once they're out and have a job, they refinance and that's how you're able to give them a better? >> once they graduate, we refinance them and we've managed to have no defaults so far in two years of lending. that's another reason we can give a great rate because our alumni aren't experiencing any defaults. >> have you had zero defaults because before you expanded? or do you think it's because students realize they're borrowing from alumni? >> i think it's a combination of making sure our borrowers have graduated and have a job. those are two of the leading indicators for defaulting. plus, we do offer a lot of other benefits that help our borrowers. i think we're one of the first lenders that has a career
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services. so we have an on staff -- >> i get it. so you're not giving them the initial loans as students. you're refinancing the loans once they have jobs. >> that's correct, yes. >> i'm sorry, i misunderstood that. >> both of you guys went to stanford. >> correct. >> we had a number of people come on from stanford that are part of this. you think it's 50% of this list. what's in the water? >> stanford's in the heart of silicon valley, there's venture capitalists all around. everybody's talking about starting a company. it's contagious. i think that helps give people confidence. >> can you create it anywhere else? or it's about that nexus of all the things. >> me and jim would not have met unless we were at stanford. like-minded people, similar ideas and ambitions. >> i think it helped accelerate us at stanford. >> thank you, guys, congratulations. >> thank you. >> very interesting business. when we come back, we're going to talk about shares of tesla, why they're under
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pressure this morning. "squawk" will be back after a quick break. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪
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the dow hit 16,000 for the first time ever. but the bears fight back. is this market getting a bit overbought? is it time for a pullback? maybe take some chips off the table and find out where investing pros are putting money to work right now. health care made easy. how three men built a website in three days to help folks find health insurance. disrupt or thes trumping government inefficiency. we speak to the cocreator of the
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health. plus, robert hormatz on global policy, the areas around the world where he sees opportunities as the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernan and andrew ross sorkin. the futures have been weaker. flat lining at this point, dow by three points, s&p off by 2 1/2. this comes after those indexes made runs at big round numbers yesterday. they touched them before pushing them back down. in the meantime, let's get some of your morning headlines. president obama wants some stepped up low tech efforts to boost enrollment for health insurance under the health reform law. he is asking supporters to help people enroll by mail, in person
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or over the phone this is coming as efforts accelerate the fix to problems experienced by the health website. also, coming up at 7:40 eastern time, the creator of the website, a website that's designed to help you get insurance, they're going to join us to talk about what they have done. these are three guys who put together some code in three days that works pretty effectively at trying to comparison shop. they actually met with hhs officials last night. they'll give us an update on their efforts to help people find insurance. and nokia shareholders will meet to talk about a deal. it's expected to be approved despite resistance from shareholders. microsoft is buying the business for about $7.4 billion. home depot reported third quarter profit of 95 cents a share. revenue also coming in above consensus, as well. and the retailer raising the sales and earnings forecast for the year. home depot says that a continued improvement in the housing market is helping its results
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and we've certainly seen that with the stock, too. it's trading at a new high this morning. we're also keeping an eye on shares of tesla this morning. that stock is down again this morning on word that the u.s. safety regulators are investigating recent fires affecting the tesla model s. the investigation could lead to a recall depending on the findings. i know you had a conversation with elon musk last week. >> he seems to suggest he was more than confident. but he's always confident when you talk to him about all the issues. he says it's three cars out on a percentage basis considering all the miles on the road plus the number of vehicles on the road that -- >> what month is it? >> we are in november. >> so in october it was 194? >> what was 194? >> the stock. >> yes. >> did you see where it is now? >> 117. yeah. >> but it'd been up 474% for the
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year. >> by the time people got excited for it and they're in at 180, 190, it's at 117. that hurts. look at that. >> if you're a shareholder, that hurts, but here's the question -- according to elon, and i don't know the exact. >> the hottest point it got. >> he said to me. just to be clear. he said to me on the stage. >> i heard him. >> on tv. >> we saw. >> he thought the stock was too high. >> we saw that. >> that it was screwing up the way you think. >> it was down when he said that too. 194. >> the best point he made was the people who had these accidents are buying new teslas. >> walked away from the accident and most of them -- >> it's not just that. >> this is not like just a -- >> people think -- people write in, the facebookians are now kind of like the way some of the -- they say there's a conspiracy.
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but facebook, seriously, that valuation will knock your eyes out, won't it? they better do a lot of things right, don't you think? >> absolutely. >> where is it? what is it today? 120 or something? >> yeah. >> because we compare to yesterday at comcast. >> 112. >> well, so we'll -- and there's tesla. that down from 200 basically. >> yeah. >> so, you know, some of the froth is taking care of itself. >> another analyst said some of the social networks are reaching the dot com manias. >> and whether that translates to -- back in the '90s, the internet bubble did translate, but all the blue chips were at 50 times like coke. >> and that was their point this week, those are the stocks that take off from here. the justice department and jpmorgan have reached a settlement agreement. we want to get to kate kelly in new york. tell us a little bit more about the details on this.
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>> reporter: becky, this landmark settlement between jpmorgan and the justice department was apparently inked in recent days. they've had the paperwork ready to go and expecting to see an announcement out of the justice department hopefully a little bit later this morning as well as public appearances by one or more justice department officials. i'm also told that jpmorgan is likely to respond quite possibly in the form of an investor telephone call to kind of discuss what this means for them and where they stand in terms of regulatory issues. here's the breakdown of that 13 billion. about 14 billion to the fhfa, this was announced a couple of weeks ago, an additional 4 billion, 2 billion, a financial penalty related to alleged misconduct and jpmorgan will conquer with a set of facts and the balance to go to other officials, folks like eric schneiderman as well as a credit union. that's for today. this obviously resolves a very
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important issue and i'm told they have fully reserved at this point to pay this penalty. however, they still have a number of legal overhang issues to look at. one of them, of course, is the ongoing probe of the two london whale traders who are actually criminally charged a couple of months ago and we're awaiting their appearances in new york. another is the ongoing probe into whether or not jpmorgan manipulated power markets. this is a carolina investigation undergoing through the justice department. there's also, of course, the sec and justice department provoke of chinese hiring practices and whether there was a prid pro quo. we don't know the reasons quite yet. and finally, of course, there is the criminal phase of this mortgage settlement we're likely to see today. that has not yet been wrapped up, guys, and we'll hear more on it today from prosecutors. >> all right, kate, thank you. we'll check back in with you a
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little later. that's kate kelly. >> notice i'm not i'm not adding any. >> it became so obvious. you can't anymore. you can't. it would be like a -- right. >> point out. >> you're a journalist. the dow surging in uncharted territory, but the index closed shy of 16,000 yesterday. and joining us now with more dennis gartman. and our guest for the next two hours is bob hormatz, former undersecretary of state. he's also a vice chair of kissinger associates, former vice chairman at goldman sachs. we want to talk about markets to start with. but i had a thought for you. welcome and welcome one and all. but you were at state and i just want to -- something occurred to me yesterday. it's rare to be able to get both israel and the saudis so incensed at us at the same time.
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is this a ploy to finally bring the israelis and arabs together so they could both hate us at the same -- >> it does create a unique kind of unity. >> how do you do it? you finally got the middle east together in their combined hate for the united states now. >> it's not easy. i think it's not combined hate. i think it's the fact they're concerned about syria. >> and iran. >> they're concerned about iran, negotiations in iran. and what it does tell you is when you negotiate with iran or negotiate in any other part of the middle east, you really have to work very hard to keep all the other countries with you to really consult with them -- >> holland is his best -- hugging and saying at least -- that was a pointed jab right at us. he said at least you're still with us. >> holland's been playing a very proactive role. as you know, the french have a serious role. and they see this as an opportunity to get back -- >> are we mucking this up? >> well, i think it remains.
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oh, i think syria's in facing major problems and not just syria, all the refugee areas. >> have we messed this up with our allies? >> we've certainly confused our allies for sure because the way we were originally -- >> john kerry? who? >> well, it was after hillary clinton, i won't go into names. >> you won't mention any names. >> it wasn't under hillary. but the fact is, we've got a problem in syria and that is it looked as if we were going to go in and take very strong view on chemical weapons. that would've done two things, one, dealt with the chemical weapons issue and enhanced our credibility. but it also was going to help the free syrian army. >> you were ready to talk about that. i was going to get right to the markets. i was telling you sm is something you can think about to get your answers straight. >> you need to look at it as a regional problem. you talk about helping syrians, you also have to help with the jord
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jordanians and others. and it's going to get worse. >> okay. it's a serious issue. i was throwing it at you because you were at state, right? >> i was. >> now let's get to gartman. let me start with you, ed. we're arguing about whether valuations are totally stretched. we had someone said it's 25 times earnings, the market, if you -- >> that's the ten-year rolling average. >> are we in 25 times earnings right now? >> no, no the in many view. that includes the huge drop in 2008, 2009. i think in the long run. that has been very useful as a valuation metric at some point. seems to me in this stage of the cycle where we're in recovery mode, unlikely to have another drop in my view any time soon, actually better off looking more traditional metrics at the one year forward and one year backwards. we're not cheap anymore. we're definitely not cheap. >> you've been a little more cautious, but you're not looking for a big decline. >> you've got a little bit
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negative too early. >> we're not negative. >> i don't mean negative but you've pulled in your horns. three, four months ago, you were already singing this tune. >> i would say -- well, first of all, the way we've managed our portfolio, we've been overweight in stocks for a long time. but i think it's reasonable to think that after a 25% plus run, trees grow to the sky. >> this will continue to grow. >> i think you're going to see the pace of returns slow down next year and will be driven more by earnings. >> this is basically what you said six months ago. >> i think that's fair. so we've gotten -- just because the way the market works, once valuations start to get too high, eventually you pay for it. that tells you that. so we haven't gotten to the point where valuations are excessive, in my view, but i think we've gotten to the point where they shouldn't go much higher. and if they do, we will eventually give that part of the gains back. so i'd rather see a nice,
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steady, 10% or so next year. >> okay. dennis, here's a way i'd intro you. there are some things that look just like the or whatever it was, you know, you remember those stocks. anything that came up. but at the same time back then, coke was trading at 50 times earnings, ge was trading at 50 times earnings. microsoft, all of those. they were all up there and that set us up for a terrible pullback. the rest of the market right now doesn't seem like it's really as bad as the frothy social media stocks. but as a commodity guy, do you see a lot of froth right now? >> actually, joe, i don't. i don't see much froth at all. if you look at the simple thing steel, coal, copper, railroads, things like that, i've said too many times, the things that either move or are the things that if you drop them on your foot will hurt, the very simple things of global economic growth are not frothy at all.
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i like aluminum. nobody likes aluminum. nobody likes coal. those are the simple things that go along with growth. i think they're there. i'll stay away from tesla, big pharma, high-tech. froth in those things, but in the simple economic growth, i don't think there's froth whatsoever. >> a stock market can have a pocket that's totally frothy and it doesn't necessarily translate to the whole -- to the indexes being overbought. >> it happens all the time. go back to when i first started in the business back in the early 1970s with the nifty fifty, you had 50 stocks with p/es close to 100, the rest of the market was extremely undervalued. we did the same thing at the turn of the century with high-tech. and there were still places where things were cheap. i think there are plenty of places that are cheap. i think you can't go willy nilly and buy stocks off the board and throw darts and think you're going to do well. but owning some very simple things and hedging them with
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options or hedging them with puts or hedging them with futures against them, that's probably not a bad way to go right now. and if we had -- >> we didn't get back to 1,000 until 1982. hit it at 1969 and the '70s was like a lost decade. it wasn't great for the nifty fifty for everybody. >> no, it wasn't. it was a long and protracted and difficult period of time. it was october of '74 when we hit 1,004, fell off of there and took a long time. took until august of '82 until we went really zooming through 1,000. >> that depresses me, ed, i can't call you a permeable as i have in the past. >> depressed and anxious, a little nervous. >> i think the '70s is interesting, in some ways we're in the reverse '70s. the big problem in the '70s was the two big spikes in oil prices.
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now the situation is dramatically different with united states energy production soaring, energy prices likely to remain low and very stable for a long period of time. the impact on manufacturing, transportation, other things really going to dramatically change the competitiveness and the economy. wind at our back now for at least a decade. >> but that would make you bullish. >> i am bullish. i -- well, believe me. i am bullish. >> would that make sense? >> no. >> there were times the market -- there were times when the market would spike even during this awful, you know, almost 20 year -- >> well, if you look at the japanese market in 1999, it was selling well over 100 times earnings. and they have been going through slow growth. they've just started to change policy in the last year or so. but the situation in the united states is nowhere like japan in
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my view. >> you say you're bullish. am i right? i thought i wrote in the notes that you think stocks may not necessarily be the best asset for next year. >> i'm in the business so i've got to decide for the investors where to put the money around the world and gives you the best tradeoff. i've been very confident it was the united states stock market for quite a long time. as we go into the new year, you have to rethink. you've already had a great run, emerging markets have substantially underperformed this year. maybe that might be a better place next year, maybe commercial real estate which has done well, but not as well. that's what i do for a living. i have to think about not just where good opportunities, i think it continued very good opportunities in the stock market. we need to consider on the global basis, is that the best opportunity for next year? and where should we allocate the assets to get the best overall return and at lower risk. >> weren't you just stocks for a long time? >> yeah. >> now you're a big renaissance asset allocation guy.
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it helps because you can talk out of both sides of your mouth to say oh, i've got asset allocations. >> i've been on the bye side and on the asset allocation side. >> oh, gosh. now you can always say well, i like stocks but there may be other assets. that gives you a whole new. that's a trick of a sell side guy, though. are you going to talk about the market or just talk about -- >> i want to talk about the market. >> not now, when we come back. >> energy, it is critical and underestimated in the significance. ed's right, we should talk about it more. >> we'll have this conversation when we come back. >> great. >> and hydrocarbon exploration in a way that's it's paid off. >> private sector is producing a lot of shale and it's good. >> we're going to continue this conversation and others. up next, we run through the best buy numbers. company reporting moments ago.
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and later our website built in three days to help people get health insurance under obama care. meet the cocreator of the health sherpa and what the government can learn from the simple website when "squawk box" returns.
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welcome back to "squawk box," take a look at the futures, see how things are setting themselves up. dow looks like it would open off about eight points.
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nasdaq off about six points and the s&p 500 off about 3 1/2 points. also, earnings out, just coming out moments ago from best buy. the electronics retailer earning 18 cents per share for the third quarter excludeing certain items. that was 6 cents above estimates. i say above. revenue also above analyst forecasts. the idea this was a browsing library -- >> you misled me on this one. >> totally wrong i am. >> we both are. i'm not singling you out. >> i took it back. that was the old ceo. that's when they had to come back in and the guy was -- and we had brad what's his face who said this new guy's crazy and they got rid of him. >> what happened? >> well, best buy crediting cost control is in better efficiencies for the results along with improved sales. >> in the last couple of months. >> it's down 6%. >> is there -- hold on, the big question, though, are they predicting that next year's
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worse? or that christmas is -- >> it's trading at 40 instead of 43, which is where it closed. closed at 43.56. >> their comps down by 6.4%. >> that was international. >> you're right, you're right. online, the comp store sales were up 1.7%. the online sales were up 15%. why are they down? >> what's the problem? >> it's had a huge move. but it does say here that the company is bracing for a fourth quarter margin hit. we know we will be facing an increasingly promotional environment. >> like walmart said that its customers are going to be expecting discounts. it's going to be there. you can look at black friday as a big example of this. black friday is when you'll see a bunch of the things lining up. you have to get customers in.
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>> this is how she said it. this is how she said it. the cfo said that the fourth quarter margin hit from pricing in other efforts will be at the high end of other estimates. not saying the margin. saying that the -- >> we're highly aware of the public statements being made by our competitors as it relates to their promotional plans for the fourth quarter. >> soaring stock. >> it's pulling back. >> hmm. >> huh. >> all right. >> all right. >> there it is. >> i standby what i said. >> i stand -- >> 10 to 40 in a year. >> that's an amazing thing. >> the demise was greatly exaggerated of best buy. >> that is true. coming up, oil traders keeping a close watch on monetary policy and supply disruptions in libya and we'll find out where supplies are headed. >> well, i tried to think i was
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important, anyway. and then, the disrupters trump government inefficiency. meeting with health and human services officials last night to discuss a better way to help get people health insurance. the details of that meeting are just ahead. "squawk box" will be right back.
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welcome back to "squawk box" this morning. deciding how much samsung owes apple. >> did you plan that? >> i didn't plan that. >> this music is unbelievable. >> that's what i've been typing you. >> it wasn't me. >> back to the news. >> they stick me with that music sometimes too. >> he's getting back to the news. >> play the music. a jury's going to begin deciding how much samsung owes apple in the infringement case. apple wants $300 million, samsung says it only owes $52 million. some more music, please.
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we have another song. >> we had to separate the animation. we had to do it on the break. we had to record it. >> some better news from samsung, it says it sold 800,000 of the galaxy gear smart watches, well above the levels many expected, some predicting the gear could be a failure. samsung plans to expand promotions for the watch during the holiday season. and are we going to have more music? thank you. we are watching shares -- we are watching shares of campbell's soup after a big earnings miss. earned 56 cents a share. more music, please. revenue also missed consensus and campbell also cut its full-year guidance. it does say this quarter is off to a much better start. thank you very much to john and everyone in the control room. >> they thought when you were over there, that you were going to try to sell them a blender when that music came up and you were standing over there. >> i would be happy to sell them a blender. >> andrew didn't pick it. >> no, i'm happy to sell you a
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blender or anything else. >> and they'll probably do it. >> it is -- it is like a game show. it's game show music. >> it's worse than a game show. anyway. >> don't suggest that the markets are a game show. >> no. >> we are a game show. here is a piece and you can do with it what you will but remember that jobs friday before the election in september 2012 and the unemployment rate in what seemed to be a tepid period for the economy, it surprisingly dropped from 7.1% to 8%. and then jack welch famously tweeted that the number was the product or implied -- he said it should have had a question mark on it. there's a new report in the "new york post" titled census faked 2012 jobs report. as andrew points out, if it was
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bombshell -- >> you'd see it on the cover instead of seeing -- >> ramona -- >> from mob wives. >> even the report itself. says he filled out surveys for people he couldn't reach by phone or answer their doors but said he was never told how to answer the questions about nonexistent people. is. >> but they also say that you wouldn't have to know what you're going to say about the people. just -- >> by creating them. >> just by creating them, juices the number. >> but from his account, it sounds like he wasn't being told. >> what we do know, though, is that the idea this was a -- just a golden number that couldn't possibly -- there was a lot of subjective stuff that goes in. if you mowed someone's lawn. it's not like this guilt edged number you couldn't possibly. anyway. >> and the important thing, you talk to economists, they say don't look at any one number. but that was particularly
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important. >> but it's 7.3% now it never went back above eight. in a statement to steve liesman, the bls says in its words, the incident has been reported to the commerce department, inspector general office for investigation and we have no further comment. that's where we are. >> let's turn to our guest this morning. former undersecretary of state for economic growth, energy and the environment and a former vice chairman at goldman sachs international. and bob, it's great to have you here this morning. >> thanks. great to be back, becky. >> talking about energy prices, we've been referring to what's happening with energy here in the united states. could anyone have guessed this three or four years ago? >> no, it's been remarkable. we shouldn't forget that we depended almost not at all on shale about ten years ago. shale's now 34% of our gas supply. it'll be up 50% because of fracking and horizontal drilling. which is fascinating when you
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look at the implications. it means a cheaper source of energy. so transportation will be cheaper, manufacturing will be cheaper. we'll be spending less money abroad buying natural gas. and the other benefit is it helps other markets because we use less gas from qatar, for instance, and other places. that goes to western europe and enables them to be more competitive, depend less on russian gas. it's linked to oil. huge changes. and every company whether you're an energy company or manufacturing company or service company or transport company really has to take another look at one of its major cost centers, which is energy. some will benefit enormously if they're able to take advantage of the efficient use of energy or the cheaper availability of energy. others that rely on expensive energy could find stranded assets, based on one kind of energy that become inefficient. >> you're kind of saying that it couldn't have been anticipated or planned, but isn't that right
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there sort of telling in that when you watch money go where it's treated best where the private sector that central planning, the best laid plans, the smartest guys in the world are looking at wind and solyndra. and then the private sector working on its own. >> absolutely. absolutely. and it wasn't just the big companies largely, some were in it. but a lot of smaller companies that companies that really weren't heard of were very adventurous and very creative. put a lot of money up front, were able to raise money for these new horizontal drilling technologies for this shale -- >> are you active with the obama administration at all right now? >> well, i worked for them for four years. >> would you tell them to do keystone at this point? >> i think in the end, reducing north america's dependence on imported energy is a positive thing. and i think from what i've seen. and i haven't been following keystone of late, there are a lot of good environmental reasons that have improved that
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enable keystone to be less detrimental. >> in the last year? >> no, the information -- what the state department's doing now is collecting more information about it. so i think they have more information available. >> what do you think they're going to do, bob? >> i don't know. it's very hard to predict at this point what they're going to do. but the fact is, that is going to be produced. that tight oil is going to be produced one way or the other. either produced to sell to the united states or canadians will sell it. >> why didn't the president move earlier on this? >> i think there's a lot of political pressure. >> can you tell us about the conversations inside the room? >> i can't. but there was a lot of environmental pressure not to do it and some of the states were concerned about it. some of the states have looked for ways of avoiding that environmental problem. >> the person you talked about earlier would do it. >> i don't know whether she would or wouldn't. but in any case, it's not that the pipeline is the problem so much, although there were some issues that were dealt with. it's more of the fact those were
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not -- it's more the fact that people are concerned about th this -- >> whether you develop it at all. >> and the canadians are likely to develop it because it will go to asia. and that's one of the opportunities the canadians have. they're going to be producing energy to sell to east asia. one way or the other, it's likely to produce. does it come here and reduce dependence on imported oil from other parts of the world. or does it go to east asia, which is more expensive. and this is part of the whole energy revolution. there's going to be a lot of changes in the way production takes place. and also in supply chains. less will go and some of the middle east stuff will go to other parts of the world. they're the ones who were utilizing the stuff very rapidly. every company has to take a look at the energy strategy and reassess. >> it's exciting, though. >> the cheapest sources -- >> for manufacturing, it's exciting. >> for manufacturing and transportation. >> we can -- some of the labor
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that made it uncompetitive to keep it here, it offsets some of the cheap labor abroad. >> absolutely. and we're going to see an increase in manufacturing here which is going to be positive for this country and employ more people. >> right. >> this is -- we have really just begun to understand the consequences of this. it really is revolutionary. just as the '70s were a bad time for energy, raised prices. now it's a good time. >> we are going to continue a piece of this conversation in the next segment. stick around. up next, a classic bull/bear debate over the price of oil. thank you. look at joe, you can see where prices stand right now. "squawk box" coming right back. (vo) you are a business pro. maestro of project management. baron of the build-out. you need a permit... to be this awesome. and from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the
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welcome back, everybody. shedding some light on saudi arabia's oil production on cnbc yesterday. >> when in libya because of the internal turbulences shut production and iraq's production got affected also, went up to more than $10 million. but when libya's production came back into effect and increased production, saudi arabia went back to around 9.5 million barrels a day.
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working at stabilizing in this industry. no, we are not overproducing because saudi arabia producing right now, a price of 95 to 100 is really good for consumers and good also for producers. >> joining us now to make the bullish case for oil. and making the case for the bears is kevin kerr, the president of kerr trading international. carl, go ahead and make your case. >> oh, i think the price of oil has never gone down unless the economy's gone down and right now the economy if anything is stalled but we think it's going to keep going up no matter what. so globally or domestically as long as the economy's doing well, oil prices are going to rise. >> kevin, what do you think? more than the economy at this point? also the supply picture? >> yeah, we have just a ton of supply right now. we've got the saudis putting out around 12 million barrels a day, exporting about 8 million. we've got overhang of supply, refineries well supplied. we may have iran supplies coming
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back online if the talks go well. we have a lot of crude out there around and key technical levels where the five-month lows will test the six-month lows. >> i think the difference here is what we've seen with the u.s. production. are you skeptical about what we see here? do you think that there's a point where it would be taken offline? >> well, it's not going to be -- if the prices drop down around $75, $80, producers here, especially shale producers are going to be under a little bit of pressure. production's not going to stop right now. we're using every barrel we're making. it's not like there's an oversupply here in the u.s. because we're still importing. and i have to disagree too. i don't see an oversupply in the rest of the world otherwise we wouldn't see overproduction from other countries either. it's hard to say supply's the issue. whatever we're producing, we're using right now. >> kevin, what's the price barrier? how low do you think prices could go? and do you think we've seen the last of this push downward?
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>> no, i think we're going to see more pressure and may see this week testing the 90 level. seeing crude move $3, $4 a day on those. we probably technically are going to hit some stops. how much further below 90 we'll have to reevaluate at that point. it's going to change week to week. >> carl, your price target? >> my price target, looking at $100 by the end of the month, by the end of the year without a doubt. >> we'll talk to you again soon. >> thanks. coming up, how three guys built a health care website in three days. no kidding. and at a cost that was a fraction of the government's health care. and pretty efficient at helping folks find insurance. the cocreator will join us with an update on the company's meeting with health and human services officials last night. after that, their website broke. no, it didn't. and as we head to break, a look at home depot this morning after the company reported strong results and upped the outlook for same store sales for the year. going to speak to an analyst in a bit.
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"squawk box" will be right back and find "squawk box" online and on mobile to do, follow us on twitter @squawkcnbc, like us on facebook and visit (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade-proud to be ranked "best overall client experience." customer erin swenson ordebut they didn't fit.line customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer.
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the problems with have been well publici publicized. the site took a couple of years to build. our next guest is part of a team that built a health insurance website that comparison shops in just three days for several hundred dollars. this was three guys sitting around coding. they met with the creators of the last night. joining us from san francisco is george, the co-creator of the health sherpa. and thanks for being here today. >> good morning, thanks for having me. >> so you sat around in three days with three of your friends and were able to code a site that comparison shops? how did you do it? >> so we took the data that was publicly available from, that's the government's data hub. and reposted it with an easier to use interface on top of it where you can basically say,
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hey, here's where i am and see what plans are available to you. >> yeah, i have to say, i was skeptical when i first heard about your site. i went online, tried it out and was blown away. all you did was require me to put in my zip code. and within a few seconds, i had a list of every plan i could go through and shop. i was blown away that you could do that in three days. why did you come up with this plan? what do you think is wrong with the government's plan? >> so to be clear, it's not a fair comparison to say the health sherpa did it in three days and the government took three years, so much we did was based off the work the team did. >> we should point out that you can't actually go in and get any of the discounts or anything -- this is comparison shopping site, this is something that makes it easier for consumers on the front end. >> and we also put you in touch with the insurance companies if you'd like to purchase directly. this only works if you're not eligible for a subsidy. >> right. when you met with hhs last night, what did they have to say? >> so they were very supportive.
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we were very pleasantly surprised to see they fundamentally get what went wrong and they are committed to fixing it. and also, importantly they see sites like ours as part of a solution and very open to helping us out. >> what's the business model behind what you're doing? >> we have yet to apply a business model to it. honestly, trying to make money off it isn't nearly as much of a priority as just getting hundreds of thousands or millions of people to actually get their insurance policy. >> you're not a 501c3? >> yes, but we're also not -- we have yet to do the paperwork to be anything. >> got it. >> why is it so hard, george, to do this subsidy? that does put in a big. and a lot of the people that things are designed for are the subsidy. if you can't do the subsidy, you can't cover the people you need
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to cover. >> we verified it's accurate. you can go on our site and use the subsidy calculator today. the thing is, in order to actually have the government pay a portion of your premium, it has to get validated by the irs, it has to go through their hub in order for that to work. there is a process for private companies to also qualify people for those subsidies and actually just yesterday hhs got us started on the first step of becoming one of those companies. >> so what happens next? you're on your way to being able to do this. i realize this came as a surprise. this was really just a hobby for you, wasn't it? >> that's how it started. it resinated. we had 500,000 people since the begin of november. it's clearly, there's a gigantic pent up need for basically exactly this comparison shopping site we built. >> did you get a sense of how soon hhs website will be up and running and credible. >> so they've -- not really. that's not something that we
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particularly probe them on. but i think that they -- >> volunteer any thoughts? >> well, so, again, i don't -- it's hard to speak for hhs. that's not reallyur area of expertise. but they did say they see the current monolithic shape of as not being the right final solution. they think it's a more modular system where you do have best in breed sort of products like ours built on top of a government hub that sort of optimized the process for everyone. >> how quickly could we see a site like yours becoming a hub on top of that? >> we're aiming for the next couple of months. another thing that they committed to yesterday was great was releasing more data publicly. the sooner that happens, we can basically publish this immediately. we've shown we can do that. >> george, we want to thank you very much for joining us. it's amazing seeing what you put together. it shows how innovative people can get in and help with --
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>> is it code, george? do you know how to write code or something? >> yes, the three of us are programmers. >> which would be easy. you know how to spell your last name. writing code is probably -- >> fair point. >> there you go. >> i can say it, i don't know if i could spell it right. >> i can't say it. i don't even want to go. i'm an admirer from afar. >> that's great. >> it is. >> we really do admire what you've done. we appreciate you coming on here today and love to hear back from you as you move further down this road. >> great, thank you. >> well, you could probably solve it. >> how innovative the private sector is in coming up with these. >> are you a democrat? why are you saying that? are you trying to throw me through a loop? >> coming up, we'll talk stocks to watch including home depot. "squawk box" will be right back. tdd#: 1-800-345-2550 trading inspires your life.
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welcome back. the music. welcome back to "squawk box." home depot results out early this morning. they have a blender to sell you. beating on top and bottom line. raising the forecast for the year. joining us now on the "squawk" news line is the senior at ubs. earnings coming in better than expected. what do you make of them? i make of them to be very good. i think it shows that the home
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improvement recovery cycle continues to gather momentum. the comp for the quarter was driven by the core. you have to put in perspective, this sector was up against two years of storm-related activity. so them reporting 7.4% same store sales increase in light of that was very impressive. >> if you were to extrapolate from this, is there anything related to lowe's which we're going to be hearing about soon? >> i think the extrapolation for lowe's is they're probably seeing similar strength. and if you look historically, the spread over the last three years and the comp between home depot and lowe's has been about 300 basis points. i think that's probably going to narrow a bit tomorrow to about 200 basis points. the most likely case is reporting about a 5% increase and probably see some good flow through on it. what's happening now is estimates are revising higher given the strength of the cycle.
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>> michael, thank you for joining us this morning. we appreciate your perspective on all this. coming up, a former health and human services secretary tommy thompson. and the futures right now, they've been sort of fractionally lower and not being helped -- maybe they are being helped a little. because they were down by dow component home depot. not a whole lot happening. "squawk box" will be right back. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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is caused by people looking fore traffic parking.y that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years, we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing; allow this small start-up to go provide a service to municipalities.
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citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally, citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge.
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the dow ending the day short of 16,000. so will the rally continue? or are we due for an end of the year pullback? an uncomfortable start for obama care. >> did some sit-ups in the morning, bent over like this probably feel 100%, moon river. thank you, doc. you ever serve time? >> but when the initial problems are finally fixed, will the benefits of the new system outweigh the pain? we'll ask former hhs secretary tommy thompson and the ranking republican on the health committee senator lamar alexander.
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plus, value picks to keep your portfolio in the black. scott black of delphi management will join us at 8:30 a.m. eastern time. the third hour of "squawk box" starts right now. ♪ welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernan along with becky quick and andrew ross sorkin. >> adjusting my tie. >> i saw that. >> our guest host this morning is the esteemed, esteemed robert hormatz. sit down, i'm going to tell you everything he's done. you're going to want to take a load off. he was former goldman sachs vice chairman, a former undersecretary of state in the state department, he's now at
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kissinger associates. you were in the obama administration under what capacity? >> undersecretary for economic growth. >> for economic growth but you were also in the clinton administration. >> nixon, ford, carter, reagan, and most recently, obama. >> wow. >> wow. >> all the way back to the opening of china. >> nixon? >> yes. >> you don't look that old, bob. >> thank you. >> well, you were a young -- >> i was just out of graduate school. >> did you go to china? >> i went to china. >> with them? >> no, not with nixon, but i went with kissinger. >> you played ping-pong? >> i did. lost every time to the chinese, but it was fun. >> on purpose? >> i wish it'd been on purpose. >> let's talk about earnings news this morning, as well, best buy earned 18 cents a share for the third quarter. when you exclude certain items, that was 6 cents better than the street was expecting. revenue was also above the forecast. but the stock is under some pressure this morning because the company was warning about its profits margins in this quarter.
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they were talking about all of their competitors and increasingly promotional environment. we heard from walmart last week and you know that's the case. as a result, best buy shares which have been on a run are down by just over 5.5%. also, home depot reporting earnings of 95 cents a share. that was better than the street had been expecting. revenue also beat the consensus and the company raised the earnings guidance for the year. they increased their same store sales growth forecast by a full percentage point to 7%. that stock has taken off this morning. home depot up by 3%. up by 3.33%. campbell soup shares, they've been getting slammed after the company missed estimates by 20 cents with a quarterly profit of 66 cents a share. campbell's also cut the full-year forecast. but does say that the quarter is off to a better start. still, that stock down by about 5.5%. >> couple of other headlines this morning. senate banking committee, thaer
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going to have a vote on thursday on the nomination of janet yellen to be the next chair of the fed. the committee will meet at 10:00 a.m. eastern time. she, of course, expected to win that confirmation. and nokia shareholders voted earlier this morning to sell the company's handset business to microsoft. the company says about 90% of shareholders voted by proxy to approve the sale. microsoft buying the business for about $7.4 billion. let's get a quick check on the markets. look over at u.s. equity futures. we'll call it a red arrow, but it's marginal. and the s&p 500 off close to three points, as well. joseph? >> yes? >> how you doing? >> well -- >> it has your name. >> let me get right to it. i'm going to get right to it right now. you want to let things breathe otherwise people get antsy and
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nervous. the $13 billion settlement between the justice department and jpmorgan is expected to be announced today. let's get to kate kelly outside of the bank's headquarters in new york. keep your eye open for that handsome gray-haired gentleman. >> ceo on his way to work. >> right. >> reporter: this is right about the time he tends to get here. maybe he'll be putting it over his head. >> he's behind you right now. no he's not. >> reporter: okay. you had me nervous. i got the stick mike just in case. so we're waiting, of course, for the final details on this $13 billion settlement we expect to hear from the justice department later this morning. i'm told shortly after that jpmorgan is likely to hold an investor call to give information to answer questions to investors about where they stand legally. we've talked about before, there's a number of overhanging issues even after today. one point i'm sure they're going to want to highlight is the fact
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they're fully reserved for this $15 billion settlement. in the last quarter, they set aside an additional $9 billion to add to their legal reserves disclose the fact that the reserves now number about 23 billion in total. now, outside analysts estimates, after today's expected settlement, they'll have about $11 billion left. and the remaining exposure is $8 billion to $16 billion. now a final reminder of what we'll see today, this $13 billion contains a $2 billion penalty related to basically misinformation alleged to put out to investors and mortgage back securities. there's a payment already made to the fhfa and another $4 billion or so for consumer relief with the balance going to other government investigators as well as credit unions, guys. so a lot of news to look out for. we'll be hearing quite a lot from the bank and the government throughout the rest of the day. and hopefully from jamie. >> all right, kate, thank you
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very much. and, yeah, thank you for playing along. we'll check back in with you in a little bit. that's kate kelly. billionaire activist investor carl icahn says he's very cautious on equities right now. he says markets could easily have a big drop. joe's been pointing out he's been saying that for a long time. >> never liked the market. >> never liked the market on a broad scale. individual name. >> i'm telling you -- >> all right. joining us right now in the markets is the head of trading strategy at wells fargo strategies. the fund manager of the small cap growth fund and coportfolio manager of the growth fund. what do you think? we have gotten to levels that make people pretty nervous. rick, how about you? >> we've been strategic bulls all year with the 1779 target in the s&p. we hit it last week. since november 1st when we hit 1775 the last day of october, we've been telling people,
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lighten up and reduce exposure on the high beta type names that had tremendous returns this year and start rotating toward value names. and if you want the upside in the marketplace, get the exposure through being long. they cost virtually nothing so you can protect yourself on the upside. >> are you telling people to sell stocks or trade out of the high-flying names? >> both, both. i think one should lighten up and reduce those. potentially look to losing some exposure, which has been the bane of existence of many for many years. here is a sector that outperforms year after year. we're saying rotate a bit into staples. it's our tactical target, matched our strategic target. we're up here now. we think it's time going into year's end that you actually take some exposure off and get a little more defensive. >> buyback where?
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>> i think 1700 for the s&p. so we could see virtually 100-point decline. >> it's probably closer to 6% i would say. >> so you just hang out. >> if that's your downside risk? >> it depends who i'm talking to. realize i'm talking to -- >> andrew ross sorkin. >> the spectrum of people on the streets. we have short-term traders who can't vary much about a 100-point s&p decline. >> is your space largely on fundamentals are you concerned on tapering and the negative psychological impact of that? what drives your analysis? >> my analysis is behavioral strategy. so we look at macro fundamentals but never any corporate ones. we let the fundamental analysts look at that. we look at all the factors, psychological factors, political factors, anything that can affect the market and especially behavioral factors of a human
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being. >> i think you do it for 6%. >> well, again, depends who you are. if you're a hedge fund, you care a lot. >> that's fine. you do it for 20, of course you'd do it for 15. >> you do it for 20. but i have some who only want to make six decisions a year. >> i would very much agree we're looking at getting out of the high-multiple stocks. we think there's a new nifty fifty created. it's not a place we would like to put money. we're value investors. we spent a lot of time. >> including some of the new social names, like a facebook or something? >> correct. higher multiple names. not where we see value. i prefer smaller cap technology names as the rotation comes out of those names, i think there's going to be an opportunity, you know, markets certainly done very well this year. we would be building cash positions, going into the end of the year. we think investors will be booking some of their winners, and that's where i would stay away from.
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>> what are some of the names you like? >> one name we like now and doing a lot of diligence on is clean harbors, cleans up hazardous and nonhazardous waste. it's tied to the oil and gas market. it's out there, clean up frac pads, which we think the oil and gas industry will do well going forward. >> the dow's at a new high. are they frothy? at a level that you need to go to the small cap arena to find value? or are some of them still cheap? >> well, they've been supported by an accommodative fed. it has not been -- i think we're okay. i don't expect a violent correction within those names. but there is rotation. and i think what's going on in china, what you're hearing wi with -- if it's true with ibm and oracle and other names where there's a little bit of a trade war. i'd be cautious there. but the smaller cap guys who sell components, they're going to do probably well anyway if they have the right product cycle going.
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>> you see value abroad now in emerging markets, europe, elsewhere. >> we focus domestically but we see europe improving. you know, we like to play with u.s. companies with gap accounting. so semicap equipment has been doing well as they build out the foundries. we also dram pricing well, there'll be spending there. that's how we would be playing internationally. >> all right, thank you very much for coming in. >> thank you. coming up, the impact of obama care, not just on the struggling how to sign up for health coverage but on the cost of care and a changing incentives that providers get. we'll have former hhs secretary tommy thompson joining us next. later, we'll talk to senator lamar alexander who is a ranking republican on the health committee. and then, that's not him. that's scott black at the bottom of the hour, value picks from a "squawk" market master.
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the fallout from the troubled debut of obama care is far and wide. it could impact every taxpayer in america. joining us now is tommy thompson, a former health and
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human services secretary and a former governor of wisconsin. secretary governor, governor secretary, one of the more interesting things we had the former aetna chief on yesterday, ron williams. he says insurance needs to be sold. that's always the way it's been. and i think your point is that to expect young people to do this on their own when they're feeling good and feeling invincib invincible, you need them, and if you don't get them, you can't do it. >> that's absolutely correct. let me point out that i was the architect and quarterback of getting part d through the congress on a bipartisan basis. and also setting up the work necessary to implement part d. and every week, the year prior to rolling out part d, we had a meeting to find out who was responsible for what, who will take over this particular problem and solve it. and the current administration has not done that.
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as a result, you have a rollout that is absolutely chaotic and just full of confusion. and a lot of -- a lot of individuals that just don't trust it. well, as part d, over 90% of the people that are receiving part d say it's an excellent program contrary to over 50% of the people that don't like it right now. what you have to do, you've got to make sure that you have young people, the healthy people come in. but when they are ordered to subsidize people of my age category, they're not going to do it. and that's the problem with obama care. >> governor -- >> unsound. >> i think i'm going to call you governor, because i like to say governor, because the governor's back on "walking dead." i like saying the word governor because it means something totally different. >> so do i. it means you're doing something. >> well, i think governors make much better presidents too because they had to run a state before that. but here's my -- my next question is, let's say that the
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website was glitch-free from day one. are you still saying -- are you still saying that this might not work because the young people still might? i mean, it's bad enough that -- that's not what happened. and some people might be turned off now. some of the young people that you might have gotten in the first place might be turned off. would it have worked if it would have been trouble free from the beginning would it have been okay? >> no, absolutely not. it's actuarily unsound. when you ask the young people right now in the insurance industry, young people are asked people between the ages of 18 and 35 that they are paying for insurance that is a 1 to 5 ratio. and the elderly are paying five times more. congress says, oh, we're just going to have the young people of america subsidize people in an older category. and we're going to charge it 3 to 1. so the young people are picking up that 2 percentage points or
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over 2% by a huge magnitude and they're having to subsidize it and pay for it. and if you're looking at it as a young person that's healthy, why do i want to do that? why should i do it? and if you don't have the healthy young people involved, this obama care cannot function. it's going to require a huge infusion of federal tax dollars or huge cuts. and that's what's wrong with it. >> governor secretary, what do you do then, we know the problems, is there a way to fix it in your mind? >> oh, absolutely there's a way to fix it. every time we've had a real major overhaul in america, we've always done it on a bipartisan basis. this is the first time dealing with health care, social security, medicare, medicaid that we've done it on a partisan basis. completely shut out the other political party. what obama needs to do, he needs to bring in the leaders of the industry. republicans, democrats, insurance industry, people from the provider sector, doctors and
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hospitals. let's solve the problem once and for all. >> governor, but what's your fix look like. >> what's the substantive fix? >> well, first off, very easily. first off, we cost too much on administration. we've got to cut that back and we've got to cut back on the paperwork, the rule making, we've got to be able to have refundable tax credits so people that need some kind of subsidization is going to be able to buy the kind of insurance policy. and we've got to allow the companies to make rating decisions so it's actuarily sound. you're going to hold down on cost and drive the curve down and make a program much more efficient and much more affordable and be able to get health care under control. that's what we need to do in america. >> that would have to be a repeal and replace that you described. that's getting rid of the -- you wouldn't even -- the skeleton of obama care wouldn't even survive. >> no, you still have some things in obama care like the
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discrimination portions, the insurance companies with not do that. you also allow for the limitations to still stay in place. there's some things that could stay in place. but if you want to fix it, there's fundamentally flawed. you've got to make it sound. that requires a degree of rating by the insurance company. >> governor, do you think that the administration -- that the president and the people in his administration really did see this as baby steps to, you know, getting of the employers out of this business and by saying that you can keep your plan, it was kind of true if you, you know, if you could say, well, your employer ended your plan, i'm sorry we didn't know that was going to happen and you're going to have a better plan. was that dissembling? what was that? how do you view that? >> i don't want to call anyone a liar. i think it's a lot of mistruth, assumptions made incorrect. >> but we knew the whole industry was going to change. and we were going to migrate people away.
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>> no. >> you really weren't going to keep the plan you had. >> oh, no. you couldn't keep the plans. and there's no question that a lot of the individuals on the liberal side of the democratic party would like to see a nationalized medicare type system. and they really think this is a step in that direction. and i think what has come up with it is people have seen that government takeover of health care is the wrong way to go. and i think this is proven day in and day out under the obama care program. >> so you don't regret being the enabler of that huge entitlement under the bush administration. a lot of people said that was another entitlement that we couldn't afford back then. you stand on part d was the right way to go? >> part d was correct. and if you look at the actuarily soundness of it, you'll find it's better than any of the estimates predicted. cbo scored it very much higher. we've saved money every single year under part d, 90% of the
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seniors of america like it and say it's an excellent program. and you couldn't get 90% of the seniors in america agree upon free apple pie, yet they like this program. >> okay, governor. >> governor, also, happy birthday. >> thank you very much. thank you. >> you don't look a day over -- >> 29. >> 29, we'll go with 29. >> you lie, too, but i love you. coming up, we are going to talk about the renewed accusations of rigging the jobs report. jack welch, stay tuned for this one. we'll tell you how it supposedly happened after the break. then lamar alexander will join us about the troubled rollout of obama care. but they didn't fit. customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy. repeat customers, i'm happy.
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welcome back, everybody. on a jobs friday in september 2012, the unemployment rate surprisingly dropped from 8.1% to 7.8%. it was a big number, it was right before an election. rick santelli questioned it on "squawk box" and jack welch famously tweeted the number was the product of manipulation by the white house. now there's a new report in the "new york post" titled census faked. it claimed that the surveyors were pressured to fake surveys in order to fill in data gaps when it was difficult to get adequate response rates from its surveys. the bls requires 90% return
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rates on those things. and they do have someone in this story that says he did fake it. now, he says he was not pushed by anyone to do this that he was doing it on his own or wasn't told what to write on those. but it would change the numbers if you see things like these adding up. in a statement to steve liesman, the bls adds, the incident has been reported for investigation. we have no further comment. when we return, we're going to go to value picks from a "squawk" market master. delphi's scott black, a member of the prestigious baron round table. as we head to the break, let's take a look at the u.s. equity futures. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed
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welcome back, everybody. the dow reaching new highs. it was unable to close above the 16,000 point yesterday. we are continuing our what's working series with value picks in this bull market. joining us is scott black. and scott, let's talk a little bit about the market's valuation overall. anyway you had some concerns and you've said it's been a little more difficult to find great bargains at these prices.
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>> absolutely. if you use the s&p 500 as a proxy, becky, at 1,791, it's 17 times this year's earnings. now at historical standards, it's a little bit overvalued. the mean has been about 16 times. if you look at small and mid cap, which is the russell 2000, roughly 25 1/2 times expected earnings driven by et, fs. it's very difficult to find cheap stocks in the small and mid cap arena. >> although it's been tough to fight the fed, as well. and you don't think the fed's going to let up any time soon. >> no, i think janet yellen, she's an excellent economist but she's a continuation of ben bernanke's policies. i think she fears that the economy could be sluggish here and instead of opting for a recession she's going to keep the pedal to the metal and i don't see tapering coming. the one thing that could dislodge the market is when we revisit the debt ceiling and the continuing resolution at the
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beginning of the coming year because it looks like there's still a lot of animosity between the democrats and republicans on the hill. >> so what do you do in the meantime if you're trying to find places to put your money? are stocks still the way to go? >> absolutely. because, you know, the ten year gives you almost no return. what you have to do is find deep value, high return on equity companies that have solid earnings prospects, but still sell at low multiples. and i have a couple of small and mid cap stocks for you this morning if you'd like them. >> i would. why don't you tell us about myriad genetics. >> it dominates the tests for the genetic marker for breast cancer in women. that's roughly 90% of the revenue. the stock got hit hard earlier in the year because the supreme court ruled you can't basically patent or have proprietary licenses on things that occur in nature. the stock fell out of bed. we used it as an opportunity to buy. the stock is roughly $26 at this
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point. there's over $6.30 in cash with absolutely no debt on the balance sheet and they should earn $2.05 to $2.10 and we tracked out the stock based comp. an 11.8 multiple on next year's earnings. it's a june year, it's an excellent company. they're working on markers for melano melanoma, carcinoma of the lung and they have them for prostate and colon cancer. and genetics is a good growth area long-term. and people want to see if they have predisposed certain types of illnesses. i think it's a very good company that had about nine consecutive up quarters with no breaks in earnings and it's a cheap stock statistically. >> i know it's hard to find out what's going on with obama care with the changes coming to the health care system. but have you thought about any of those things and how it may impact myriad? >> i don't think it impacts them that much because of the fact -- it's off a small base. it's a new business.
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where it is difficult -- and we've called them, companies like united health and aetna and cigna, it's difficult to know what they will be. some have gone higher over the past year, but almost impossible to model because you don't know what the impact of the government will be on those companies. >> all right. >> much more difficult to get insurance if you have these indicators that come up as a result of these biomarkers. is that a big risk? >> i'm not sure how that's going to be dealt with. you can have a proflaktic type. a lot of people followed angelina jolie this year. and i suppose if you think you have a 90% chance because your mother and grandmother had breast cancer and you want to have a double mastectomy or lumpectomy, i suppose you have to do that. i'm not a doctor, i went to business school not medical school. >> let's talk about sky works, a semiconductor company that you also like.
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>> i do. it's a company here on route 128. the stock is 25 and change. they have little over $2 a share in cash which is $500 million. basically they make rf chips for your mobile phone. 40% of the business goes to samsung. and the other part of the business goes to industrial and medical like barry and johnson controls and has higher margins than the typical mobile business. the top line's growing at about 15%. again, if you back out the cash and there's about 37 cents a share in stock-based comp. it's really selling at 10.8 times next september's earnings. again, the market multiple's 17. this is 10.8. this is a huge discount. bullet proof balance sheet. it's a good company and they're in the right sectors. they're not hooked to the pc or the notebook. they're in the mobile and industrial platform. i think it's reasonably good value. >> you should built a mutual fund on route 128 the company,
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scott. you could have for the last 20 years. data general, prime computer, computer -- i mean it's unbelievable, isn't it? >> yeah, but they all went under over time. unfortunately, the pendulum has switched to the -- to silicon valley with the exception of the biotech in cambridge. a lot of the momentum, unfortunately, was gone from boston. >> you're right. that's right. all of them were up there. >> yeah. >> scott, thank you, it's great talking to you. >> thank you for inviting me. >> we'll see you soon. >> we are also watching shares of tesla this morning. u.s. safety regulators are investigating recent fires affecting the tesla model s. here's what elon musk said last week. >> there's definitely not going to be a recall. there's no reason for a recall, i believe. the perception is if you read the headlines, it sounds like teslas have a greater propensity
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to catch fire than other cars, in reality, nothing could be further from the truth. >> phil lebeau joins us now to break down what's really happening and whether actually something has happened between the time we've talked to elon musk and now. phil? >> hey, andrew, and i think what has happened, they've been gathering information, certainly since the second fire in tennessee and they've said you know what, we do think there's enough for a formal investigation. what happens now? here's exactly what the process as far as the safety administration is concerned. they have opened a formal investigation. and that's an important designation. in the past, they were simply looking into the incidents, now it is an informal investigation. they'll continue gathering information from a number of sources including from tesla and tesla engineers. and it could lead to a recall of the model s. in investigating, it was
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prompted in washington state and tennessee, the two model s fires that resulted in battery fires due to undercarriage strikes with roadway debris. here's some pictures from that tennessee fire which happened in early november. nobody was skrired, by the way, in either of these model s fires. they have been working with investigators. take a look at shares of tesla since the first fire outside seattle on october 1st. shares down 38%. and, guys, you played that clip from elon musk saying there will not be a recall as much as he may be confident there won't be a recall, ultimately, it's not his call. the federal government will investigate what's going on. if investigators believe there should be a recall, they'll go to tesla and say we really think there should be a recall. now, tesla can say we disagree at which point the feds could take them to court. but typically what happens in the auto industry, if they say there should be a recall, almost 99% of the time, the auto makers go along and say, you know what,
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we'll issue a recall. back to you. >> hey, phil, one of your other areas you're an expert on, boeing, you saw it yesterday, the big orders. and you see the stock ran up to 142 and closed at 138 which was at an all-time high, still. but i wanted to point out it's now got a market cap of $104 billion. some day, boeing could be worth as much as facebook, phil. >> it has had a heck of a run. and those orders were huge. and, you know, it came out over the weekend, and i think that guy lost to a certain extent. people woke up and said that's a bunch of orders coming out of the dubai air show. >> we used to do those -- that's why i mentioned it. the annoying comparisons back in the late '90s when aol was worth four dow components. >> right. >> some day boeing, boeing might be worth as much as facebook.
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that's a statement, isn't it? >> absolutely it's a statement. and i think most people look at this and they say, you know, if they can execute from here, they believe there's more space to run. >> yeah. >> okay. thank you for joining us. i want to talk more about tesla at some point so hopefully we can do that in the next couple of days. >> i would understand more about how it all works. it's a longer conversation. >> even though you're never going to -- are you ever going to buy a car? >> i'd love to buy a tesla. >> if you bought a car? >> when the prices come down. >> okay. coming up, the progress on the website, the obama care website. but how different will health care look when the exchanges are up and running? senator lamar alexander is joining us next, the ranking republican on the senate health committee. tomorrow on "squawk box," harvard professor bill george. plus, dell chairman and ceo
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michael dell on going private. and roger altman on the state of the economy and the possibility of a fed taper. the fun starts at 6:00 a.m. eastern right here on "squawk box." we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ and this will be your premium right here.
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sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. love this guy. okay, does it bother anybody else that the mime is talking? frrreeeeaky!
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[ male announcer ] bundle home and auto and you could save 760 bucks. alright, mama, let's get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. state farm. welcome back to "squawk box." soft walker engineers said to be making progress with the troubled obama care website, but will it be too little too late for the economy? lamar alexander joins us now
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with more on the fallout. good morning to you, senator. >> good morning. >> so how do we fix this thing? what happens next is the big question. >> well, first thing, to try to put the president's promise into law. and senator johnson has a bill to do that permanently. the president wants to do it after the next election, but at least with the 5 million cancellations we've already had, we try to make it possible for many of those to keep those policies so there'd be fewer americans hurt. although, the truth is that the horse is already out of the barn for a lot of those people and it's not going to be possible to keep those policies. >> senator, you know, from the republican position, is the goal to let this thing hopefully, i would imagine from your party's perspective, fall under its own weight? or do you think there'll be a real push come next year to try to get rid of it completely all over again? >> well, the -- it is falling of its own weight. our purpose is, number one, to try to keep americans who are
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being hurt from being hurt too much, such as with senator johnson's bill to put the president's promise into law. the second thing is, we want to show the american people what we would do we're in charge. we'd move in a different direction step by step instead of trying to change the whole thing all at once as obama care did and as hillary care tried to do. so we would try to move toward more competition, more choices, cheaper policies, that would allow americans to actually buy affordable health care. >> i understand that, but as you said, the horse is out of the barn, the train's left the station, whatever phrase we want to put on it. >> i'm writing them down. >> and therefore, then the question becomes, how do you fix what is a challenging situation as opposed to completely rewriting everything from the beginning. >> obama care is almost impossible to fix because it goes in the wrong direction. but it's only part of the health care delivery system. what we can do is start moving step by step with that same health care delivery system and make insurance more affordable. for example, small business
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health plans allow small businesses pool the resources, offer insurance by spreading the risk. we've got a plan for that. 750,000 more americans would be covered, 3 out of 4 would pay less for their insurance according to the congressional budget office. we have a whole series of these steps we would take toward less expensive insurance but it's a different direction than fixing obama care. >> i guess, senator, the question becomes what do you do with the changes that have been put in place to this point? would you still insure people who have pre-existing conditions? would you still allow kids or people who are 26 years and under to stay on their parents' health insurance up to a certain point? would you keep any of those provisions? or would you basically throw out everything that's been put in place? >> well, you go step by step, i think, the 26 allowing children to stay on their parents' policies isn't very hard. many insurance companies are doing that. preexisting conditions is harder. but if you're a 39-year-old
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woman in tennessee with lupis. if you're allowed to buy a plan that's regulated in kentucky that offers you limited benefits and it fits your needs and you can afford it, that helps you with the preexisting condition more than the obama care plan that allows you to have your policy canceled. we literally had 16,000 policies canceled because they didn't meet the standards of obama care. >> one of the biggest problems in this nation is the problems from health care and the costs that have continued to grow. obama care doesn't address a lot of those issues. this was more about getting coverage from people. there are some major problems with the health care insurance industry and with health care pricing that continues to go up. how do you tackle that? >> well, you -- competition, choice and lower prices. if the president says employers have to offer more expensive insurance, the price goes up. if the president says as obama care does that you can't keep your policy unless it has all these certain benefits, and the
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price goes up. you can't offer more benefits if the price doesn't go up. you have to say let's allow people to buy their insurance across state lines, small business plans, make it easy for employers to give cheaper insurance to employees who live a better lifestyle as expanded health care savings accounts. let's put medicare in competition with medicare advantage. it takes a while to say these things, but this is the plan for more affordable insurance that actually works. >> okay. senator, assuming that you're right or that you want to go in this direction, just tactically walk us through the politics of getting there given where we are today, what are you and your party prepared to do to get there? and how would it even work? >> one is to put the president's promise into law. hopefully we'll have democrats who agree with us on that. there may be other things we can do. >> do you think democrats will agree with you on that? >> i hope they would.
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it's hard to uncancel 5 million insurance policies which is the number already. and when the employer mandate kicks in, the requirement that employers provide a more extensive and more expensive set of insurance, you're going to have millions more of people without insurance. so maybe democrats will join with us. >> that's the way we do it in our constitutional system. >> i understand. real quick before we go. come january and february when we have conversations all over again about the debt ceiling and everything else, is this going -- how much of the conversation is really going to be about this again? >> it's -- that's separate. i mean, the debt ceiling is a different issue. obama care is the central issue. we're going to try to minimize the pain. and over the long-term, we're headed in a different direction with competition, choice and lower prices for people who want to buy insurance.
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>> okay. senator alexander, thank you for joining us this morn>> thank yo. >> all right. horse is out of the barn. >> train out of the station. >> toothpaste out of the tube. all the king's horses, all the king'sdumpty. >> all the the kings who ares and all the kings' mens. >> jeannie out of the bottle. >> then we can mix them. like the horse has left the station. like wake up and smell the roses. you cannot get toothpaste back in a tube. i know that, right? >> i have in fact. and failed. >> coming up, jim cramer's getting ready for the trading day ahead. we'll get his thoughts on best buy, home depot and this morning's big mover. >> you thought earnings season was over? think again. tomorrow we get quarterly numbers from lowe's, jcpenney, deere and more all before the
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box." take a look at the futures. we do have -- we had some red arrow before. things turned and slightly. the s&p 500 off a point as well. let's get down to the new york stock exchange. jim cramer, who is out on the west coast -- you go from the east coast -- you were at the game on sunday -- how to the west coast and back in 24 hours. how? >> i thought that dream source was incredible and a source of energy. you just have to plug into it. >> what do we make of the best buy earnings? they seem thrilled. they're wort about a walmartization, if will you. >> bank of america, merrill lynch, november 20, 2012. the company was incredibly cautious. a lot of people bought in, a lot of people downgraded and the next thing you know the stock
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was at 12 and goes to 43. i think this is business at usual. the people selling the stock market don't recognize the power of reiterization we're going to get. >> everybody is entitled to how big the drop is going to be. in the end he's a stock picker. if he's selling all thinks stocks, i'd say you know what, he really believes in that decline. >> i'm telling you, we were at 6,000 on the dow or 5,000 at dinner, like 10, 12 years, totally negative on the overall market. we made a big bet. i said if you bet me $50 million, i'll leave cnbc, and he wouldn't do it. that's all i'd need. and he could have is easily paid me that. >> it's such an easy thing to
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say i hate the market and then go by the stocks. >> it's always that way, no, no, everything's overvalued. carl is carl. >> everything's overvalued except what i own. >> you have seven seconds on home desfot. >> is frank blake the best retail operator in the company right now? yes. >> we'll take that to the bank. we'll see you in just a couple minutes on "squawk on the street." jim cramer, thanks. >> when we come back, an easing of the one-child policy in china. we'll talk it over with our guest host right after this. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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wish we had more time. our guest bob hormats, you say the nsa could be an excuse for not buying our services. >> we've seen the growth of information nationalism abroad. recent nsa events will strengthen nationalism abroad, make it more difficult for american information companies to operate abroad and create information or data nationalism, making a big data more
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difficult, cloud computing more difficult -- >> if you're ibm, harder to get international business? >> it's going to be harder to get international business. >> they fear it or will they want to use it as an excuse? >> in part both. they've been concerned about it before. brazil we've already seen this. >> thank you very much. it was terrific to have you. join us tomorrow. "squawk on the street" begins right now. >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla, with carl cramer who made his way home and david faber. jpmorgan, tesla, retail earning, just wait until we walk you through home depot and best buy coming up in a moment the 10-yearie


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