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tv   FOX Business After the Bell  FOX Business  December 28, 2012 4:00pm-5:00pm EST

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accounting issues over there, hpq is an issue. dow down 150 points, hpq is definitely a culprit. the year-to-date chart is ugly. david: hate to focus on the losers, but can't avoid them. amd down big time, 12% the whole week; right? >> yeah, last i checked, that was the number, down more than 5% as well for today. just another executive, this time, a 25-year veteran of the company leaving, and it's things like that that hurt a company so they definitely had a selling sprees. alcoholic-- >> shaking off that news. >> yes, exactly. there's the bells, guys, have a great weekend. david: thank you, lauren. the bells ringing on wall street, wow, what a week, not a good one, not a good day to end the week either, the dow looks like it's settling at close to
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150 points to the downside, now 156, may be a little below or above that. now, lauren said 170 was the down mark. i missed that, but may be reaching that as we head down into the end of the closing settling. s&p is off by slightly less percentage-wise than the dow jones. nasdaq off less than that, and the russell 2,000 less than that. it is not a good day. you can't put lipstick on this pig. >> look closer at the energy sector. it was the worse performer with energy stocks ending lower for the sixth straight session. the move lower comes despite a rise in more than 2% on crude oil this week. david? david: as was just said, it's not all red. there is some green on this markets, and it's focusing on retailers. barnes & noble, macy's, zales. people buying diamond rings and bracelets.
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>> oh, i wouldn't know, david. i'm not a realist, apparently. david: only one woman on my diamond list, but go ahead. >> a look overseas at japan, last trading day of the year, shares closing, get this, at the highest level since last year's tsunami for the year gaining 23%, the biggest percentage rise since 2005. ending on a nice positive note over there. david: wish it was good here. congressional leaders meeting with the president, what's hanging on the edge of the cliff is higher taxes on dividends. coming up, the chairman and ceo of southern company owning a bunch of power companies in the south tells us why the tax hike would be a huge blow to his industry, a blow everybody will feel as usual. it's passed on to you, the consumer. >> financials a big winner up this year we have an analyst who expects the gravy train to roll on next year. find out the banks he likes for 2013. david: a lot to cover, but
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first, what drove the markets with the data download. ending the week down more than 1.5%. lack of progress, of course, in the miscall cliff negotiations, and all ten s&p sectors in the negative tear -- territory the second week in a row. oil slipped into the red today, but finished the holiday shortened weekend positive. notching at 2.4% gain to end the week, again, over the $90 mark, $90.80 a barrel. home sales jumping to the highest level in two and a half years last month. the national association of retailer -- excuse me, realtors. index rose 1.7%. >> good news. we have sandra smith in the pits of the cme, and john stevenson it's the era of buy and hold that's over, and larry says why he's not one bit concerned about the fiscal cliff -- we need to talk about that one, but
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starting with sandra. sandra, we talked about oil edging down a limit today, up this week, a couple key inventory reports driving the markets today. >> yeah, well, there's a much bigger build in crude inventories than an anticipated meaning we're not using as much oil and gasoline as analysts expected showing weakness in the economy. we saw a selloff in oil prices today.3 although, they hung on to the $90 a barrel mark with gains, and the energy market, natural gas, that's colder temperatures rolling through the country. we had a storm in the northeast, across the central plains, and people are heating their homes and demand is going up for natural gas, and natural gas, a bright spot in the commodity market for the year up 12% so far for 2012 so that trend's playing out in today's session, and, by the way, guys, i want to make mention as i stand in the s&p500 futures pit, trading for 15 minutes after the close of new york trading, we just took out the session low, and i know
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your guest is going to say he's not worried about the fiscal cliff, but there's continued concern here on the trading floor, and the minute we saw president obama was not presenting a new plan, we took out the lows of the day. important to point out in the final few minutes. david: a great point because it's been misreported in a lot of places that the president has a new plan. it's not a new plan, he mentioned the $400,000 thing like it's a new thing. it's not at all. he mentioned that a few weeks ago. what would happen if there is a conclusion over the weekend, sandy? a drop in the price of oil? >> well, the traders i talked to on the floor say that those who think we are going to get some sort of deal or conclusion to this fiscal cliff by the end of the year think it's going to be a bad deal so while some are saying that we could get a rally if there's a deal reached by the president and congress, we could get a quick ramly, it's only temporary and we face the reality of the situation in the
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new year, and bottom line, david, when we looked at the oil reports today, there is a significant decline in energy consumption in the united states right now, and while that might be good to lower gas prices, it's not a great sign about the overall economy. david: it's not at all, but it makes the current rise in oil prices seem stranger than before. if the economy's slowing down, no reason for oil to be above 90 # for the long term. >> right. david: thank you very much. >> the trend with the retail consumer as a whole; right? david: market pam, john stevenson and larry, multimedia trust associate portfolio manager from west newton, massachusetts, and if you go to boston college, you see that name everywhere. spent a lot of money at that college. i hope we didn't misrepresent your position. you're really not concerned about going over the cliff?
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you don't think it affects the stock market specifically as much as some say it will? >> i think there's a shoacial effect -- a short term effect, but look at it in terms of basics. it's contractual fiscal policy. we're going to squeeze incomes. it's going to cause unemployment causing political unrest, but it's going to have other effects, probably as previous speakers said, causing price of oil and gasoline to go down, but what's a sure thing and very, very important for the market is that interest rates are not going to go up. what we're seeing, if we are not watching the magician doing fiscal cliff tricks, is the elephant in the room is smart companies are able to buy other companies with cash. a couple examples of companies that are buying other companies with cash. the best one's disney. they just bought lucas films for $4 billion financing it with debt. 2% interest rate, $80 million
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pretax cost, $50 million after tax cost. they pay that for three years, fourth year, they get "star wars" and make a billion dollars. tremendous deal for the shareholders. it's free money. david: essentially free money investing? >> absolutely. you're going to see mergers done for cash. the banks are told by the federal reserve to basically get the money out. they don't want to seem to lend it to mortgages, although, that's getting better, but corporations are buying stocks for cash, and what's important is that the markets figuring this out and pushing them up in the gaming industry. >> john -- >> consolidation. >> john, i want to jump in here. ahead of the choppiness we know occurs over the next few days, hours, it's anyone's guess, there is positioning for different outcomes. tell me how you are preparing for what may or may not come out of washington? >> well, thanks.
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i think the reality is we're going to go over the cliff. the only issue is how long do we stay over the cliff? if it's 60 days, 90 days, that's a big problem for the economy, for the market, and i think you want to raise cash. i recommend starting with a cash weight of at least 10% and go up 2.5% each week, depending on whether or not they can come to agreement. i mean, i think ultimately it probably will come to agreement, but let's face it, obama's not going to get inaugust -- inaugurated until the 21st, and boehner thinks the real deadline is february or early march. that's a time frame to look for, and the reality is if you look at the markets over the last while, they are correlated between the commodity markets, oil, bonds, stocks, and that has not been the case for many, many years, and so it's really one trade. there's a macro trade. what's going on in the u.s. with the fiscal cliff, and before that, it was all about europe.
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david: larry, your picks, disney and direct tv, i know you like the vegas stocks, las vegas sans, boyd gaming as well, but what about john's point that just to be safe because you never know. i mean, the worse can happen, happened before, and could happen again, those jokers inside the beltway very often don't come to a conclusion. wouldn't it be safe to put at least 10 #% of the portfolio in cash right now just in case? >> i just can't see it. the math is so compelling on the other side, and you have this just incredible sentiment. thirty years now, you have not been able to lose money in bonds. a lot of people think that it's impossible to lose money in bonds, and it is. you surely are not going to make any money in bonds other than clip your coupon. you're not going to make any money in cash. david: let me just stop you for a sec about bonds here because it is not impossible to lose
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money on bonds if the companies they are based on go bankrupt or the governments they are based on go bankrupt, and people are saying that might happen here. >> you could have a credit incident, but we're not going to destroy the faith in credit of the u.s. government. david: we already have. are you kidding, larry? we already have. >> i doubt it because, really, if the credit were destroyed, the cost of finance at the margin would be going up, and the cost of finance at the margin for the federal government is going down. >> larry, consumers are pulling back, a consumer that's pulling back, not spending as much, that is not going out and driving and consuming oil, the confidence seems eroded before a decision is made in dc. we don't even need a decision. david: larry, i know what you say about interest rates, overriding factor thinking about investment and how much cash, but, again, right for now, our credit rating is the best in the worlding but it's a lousy world
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of credit. that's the problem is that with all this money printing going on around the world, i'm wondering when that comes back to bite us. >> well, that's why you don't want to be in bonds and be in stocks because stocks -- david: good point. >> when stocks accelerate, good hedge against inflation. the consumer in the cave, i don't buy it. the consumers spent a billion dollars on "call of duty," a billion dollars on "skyfall," and a billion dollars on "the hobbit" fashioner than you can shake a stick. the movie industry and video game booming. david: hollywood did great in the depression. john, i got to go to you because you have had little time here. a couple picks to focus on, halliburton and citi group is one of your picks, why? people say it has not fixed up a lot of its mess. >> well, it's cheap. i think that's basically it. groups trading at 7.7 times
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earnings, historically trade at ten times, winding down of citi's holdings a benefit to the stock. it's the cheapest in the large cap universe on price to book basis absent bank of america, trading 8% of price to book. i think this is what you want to go into, things with definable catalysts, and when you have a stock rally, the financials participate in the history of markets. it's one you want to hold on. energy side, clearly, energy is not growing in terms of the demand in the u.s.. where it's growing is the rest of the world. >> right. >> we don't have any real opec or non-opec growth in terms of plux. who gets the call? the people who do offshore and deepwater drilling and down hole work. that's why you want to be there. >> global diversions here to some extent. all right, thank you very much, gentlemen, john stevenson and larry, have a great weekend.
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>> thank you, you too. >> thanks. >> leaders meeting with the president right now this very moment at the white house and the country and entire world watching because if we go off the cliff, markets around the globe could be affected. live to the white house with the very latest. david: taxes on dividends could be rising. chairman of southern company who owns a bunch of utility companies, why that could spell trouble for more than just investors. >> liz joins us telling us which big companies will be first to take a costly fall if we, in fact, do go off that cliff. ♪ [ indiinct shouting ]
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hi hi ♪(whistling tune) ♪("don't worry be happy")
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shy david: it was wild in the pits at the cme was closing in chicago. sandy smith is there. what's going on, sandy? >> this is the stuff you don't see in a trade desk in the
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office or at home. the trade action picked up in the final minutes here. the s&p500 index of 500 stocks we watch every day closed at the top of the hour, at 14 # 0 # 2, hung on to the 1400 level. the futures, the pit i'm in, continues to trade for another 15 minutes. david, for those 15 minutes, we saw continuous selling. it continued to get hammered, and a trader said it was dallas rows, new lows of the session, and another said we fell on the lowest level in the front month futures contract to the lowest level since thanksgiving. the news that president obama did not come up with a new plan when meeting with congress just now, not good news for the markets, and we closed at session lows for the s&p 500 futures, probably indicating there's selling when trading reopens tonight and tomorrow morning as well. david: fasten the seat belts, a bumpy weekend and monday morning of trading, well below the 1400.
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shibani: dropping a percent. watching shares of rukus wireless with new highs, possivities with one stock. >> focus on that. it's been a rough week, month, and certainly day. here's the shares now, and there's the cymbal. they closed up 2.5%, but they hit an all-time high, only ipo last month, but they were down a lot since the ipo. the all-time high was 23.28, a rise of 5% basis. interesting to talk about a stock doing well oo a day when most everything is down. hard pressed to find an up arrow, but this is the fox business booth. welcome. we have our guard dog which is the rukus dog, gaae that out to the ipo down here. if you want to see, here's the hair spray and my pick, our booth for me and producer liz all day.
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shibani: thanks a lot, lauren. >> see you later. david: where was the guard dog when the bears started to bite? that's the problem. president obama meeting with the leaders at the white house. misreporting going on that the president had a new deal, looked like progress was made. no. the president had the same deal that republicans walked away from about a week ago, if you call it a deal, the deal is that he won't tax people higher above the 400,000 mark. shibani: the meeting still going on, rich edson live at the white house with the latest details. what do we know now, rich? >> what we got from an administration official, that president obama offered what he detailed in the speech a week ago keeping tax rates where they are for families earning less than $250,000 a year, extending long term unemployment insurance policy, and that bit of detail he gave a week ago in a speech is basically derived from the larger deficit proposal offered over, really, the last couple
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years as president of the united states. we're waiting whether or not in the meeting, lasting an hour at the white house, started at 3:10, is whether or not they made progress towards changing that proposal in a fashion to pass the house of representatives or make it viable for some senate republicans to join with that. the president, the administration officials say they offered the proposal as a way to get republicans to come back with something else, they say. if not, the president wants this plan to be voted on in the house and to be voted on in the senate. this proposal is unlikely, would be making it through the house unless there's progress made off the president's opening offer, a very old offer, then we're in trouble. back to you david: that's why s&p futures went down after the bell, focused on what happens with no progress. that may change. the president is still meeting on both sides. we'll wait and see what happens when they come out if they give a talk which could be any moment, maybe in this hour. rich will be live at the white house preparing for any breaking
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developments, and he will come out and report to us the moment it happens. we have the live camera set up. coming up, the chairman and ceo of power company southern whether energy companies get the squeeze for more taxes. that, of course, passed on to you, the consumer. shibani: a nice year for financials, bank of america the biggest winner -- all right, breaking news, the meeting at the white house is officially over. we're going to get more details coming straight up after the break. ♪ copd makes it hard to breathe
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[inaudible conversations] david: okay. breaking news. let's show the pictures, if we can, because we're getting shots of boehner coming out of that meeting, nancy pelosi, the meeting is over, and all the major leaders were in the white house. we had the leader of the republican side in the senate, the democratic side in the senate, the republican side in the house, democratic side, geithner was there, tim giteny, treasury secretary, vice president there, and the president. the question is whether they got anything done at all. what we heard was, in fact, the president presented what was announced initially as a new plan, turned out it was not a new plan, but the same old plan to raise taxes only on those mmking above $400,000 a year. shibani: is -- it ended moments ago, all the major whose who were there, and timothy geithner. there's a ceo call at 5:30, hour and five minutes, talking to top
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ceos about the latest on the fiscal cliff, whatever the developments are included on that call, we know lloyd blankfein will be on the call. david: keep the picture up. you never know what picture you'll get. go to rich edson following this. we mentioned the fact, actually, you alerted us all via e-mail that this proposal was not really a new proposal. the president was planning, but its led to s&p futures going into the weekend going sharply down. sandy smith there in chicago reporting that, indeed, it was this announcement, the announcement of nothing new that led the futures down. what are the folks there saying? >> well, you know, david, it's, you know, telling they are not saying anything. they left the white house and headed back to the capitol, and when you look at what the opening proposal was from the president, essentially what he detailed in the speech a week ago, essentially what he proposed for the past year and throughout the campaign, unless there was movement within that meeting, and he was really hanging it on republicans to say, okay, i want an up or down
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vote on the proposal, one that would allow tax rate increase on income amounts of more than $250,000 a year, more spending on unemployment benefits, long term unemployment benefit, something unlikely to pass the house, probably wouldn't pass the house, a tough time getting through the senate that needs 60 votes in all likelihood, then, unless they made progress towards a second proposal from republicans, well, pretty much, we're headed towards the fiscal cliff and going over. there has to be movement towards a middle ground, and as the meeting started, there was no. we are awaiting reports on what happened. they met for an hour and five minutes. could have been progress towards another type of workable frame work to maybe kick this into next year, but as of the start of this meeting, it was not looking good. the white house will be updating ceos at 5:30, a staff call, staff from white house calling a number of ceos, having a conference call to update them. lloyd blankfein of goldman sachs on the call, trying to confirm
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other members of the call. thinks moving quickly, but not much progress. david: if there had been any kind of conclusion or any kind of agreement between republicans and democrats as we're looking at pictures -- that was nancy pelosi moments ago, if there was an agreement, there probably would have been an announcement, come out to the gaggle of reporters saying they are happy, and there was none of that announcing going on today; correct? >> exactly. there was none of that. if nay reached an agreement, it would have been announced here or at least by the president or there's an announcement by the president. it could be a good sign that they are not talking because maybe they did find some progress they don't want to discuss with the media or mess it up so they are just leaving. you know, you consider how this meeting started, there would have had to have come a very long way in a decent -- a decent amount of negotiations would have had to have happened there that have not happenedded over the past couple months, and, really, the past four years to
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give that type of progress or that type of sense to any type of progress, and you're not seeing that and have not seen that in washington, really, all we know is what they opened the meeting with not a very good sign when you consider if what the president laid out last week, and it's what he laid out on the campaign trail, but a scaled down version of that over the last couple years. shibani: rich, could be preparatory work going on for a vote in the senate. there was a rules reform proposal sent around the senate to avoid a nuclear option on changing the filibuster provisions. what's that have to do with what happened inside the white house? >> well, this is something that the democrats and republicans have been arguing over. it's one of the next major issues that washington has to deal with after the fiscal cliff involving the 60 # vote threshold, you know, republicans on the other side of this a few years ago when they controlled the senate so -- david: rich, stay with us. we want you in the conversation with elizabeth who focused
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specifically on how this affects us. i'm tired of the gamesmanship in the beltway. how does it effect us. >> we are going to hit the debt ceiling monday if that is not resolved, and telling congress in a letter that i read, tax filing season, and that hurts consumers in the wallet, and, you know, we've been talking to goldman sachs, fidelity, showing us sectors that will be hurt, not only just because they rely heavily on government contracts, what goldman sachs said, it's not just defense, but health care, you know, environmental waste services, and fidelity says, watch out, banks are going to get, of course, hurt too. mia activity is off 20% because they -- the capital investment, the capital spending is not there. you know, rich edson has been reporting this that, you know, it's hanging right now on the house.
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there's more than a dozen seats that the democrats hold in the senate that are -- those guys are in the red states so if they vote for any type of tax hikes with the midterms coming up, those senate democrats are looking for cover from the house. house moves first to give them political cover. then you go over the cliff, this is the chatter on wall street, and early in january, first few weeks of january, rich herd heard it too, there's a deal, everybody is a victor. whether or not the tax hikes hit the $250,000 crowd is the big question mark because that is solidly middle class, and midterms, nobody says it's a hit for the upper bracket. it's a middle class tax hike. shibani: we know nothing new was presented on the table. what does the presidentment to hear in the way of feedback from %-considering he knows what they
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have to say with no new options? >> depends on what ceo is most talkative to the press; right? lloyd rarely talks to the press or jamie dimon, but it's who provides the president with the support. honeywell could be there talking. that's what he's trying to do, line up ceos on his side of the aisle to support whatever the decisions are. david: rich edson, we have to break, stay with us, please, because i know you are there, but have you seen corporate big wigs in there? >> no, just a call, david, not holding it at the white house, not a meeting at the white house. david: a conference call, and, again, expecting shortly to have word of what went on in the so-called all-important meeting with republicans and democrats inside the white house. we know they left the white house. we have not had any announcements of any success. we'll be back to the white house right after a short break.
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david: this was supposed to be it, folks. remember that anticipate in the godfather when all the warring factions got together in one room to iron it all out? this is what was supposed to happen in the white house where we had democratic leaders in the senate and house, republican leaders from the senate and house, treasury secretary, even the vice president was there. they were getting together to iron out their difference. they had their meeting came out and rich edson, they didn't talk to us. we don't know what happened? when will we?
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>> i also don't know if anybody hugged, david. david: i doubt it. >> a la, the godfather. what happened at the beginning of this meeting, according to a senior administration official president obama reiterated offer he gave in the speech a week ago. basically keep all the taxes where they are for income amounts up to $250,000 a year and less. extend long-term unemployment insurance for two million americans, what is described as some other items, potentially the amt patch involved in that. that helps about tens of millions of americans, middle class americans from having to pay the alternative minimum tax. at that point that is essentially just a scaled down version of where president obama was in his opening offer. so we're still rat just a smaller version of an opening offer, especially when you consider taxes. we're not sure in the hour and five minute meeting was held here at the white house if congressional leaders were able to make any progress the way the white house phrased this is basically this is the president's offer.
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he wants up-or-down vote in the house and senate unless republican leaders come back with a second offer. that is something we've not gotten word if they threw that meeting had managed to make any progress. so far three of the big four congressional leaders left. we're still waiting on senate majority leader harry reid to leave the west wing. but at his point, three out of the four left. didn't say a word. we don't expect the senate majority leader to do anything different and actually talk to us about this one. so we're basically waiting for congressional aides to leak it to us. david: one thing that was just leaked to us, house speaker boehner is not going to the capitol. again they will have, they will meeting tomorrow. they may even meet sunday or even on new's year day, seems like things are wrapped up as far as john boehner is concernee. rich edson, thanks very much. shibani? shibani: goldman sachs ceo lloyd blankfein one of the ceo's set to speak with the president in an hour's time on latest details on the fiscal cliff talks.
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the financial sector on track for its biggest gain in nine years. what remains ahead for financials and what is at stake stake for the industry with the fiscal cliff looming? let's ask marty mosby, guggenheim bank analyst. let's talk about first, marty, we hear lloyd blankfein will be on phone to talk to president obama trying to garner his support, the president out of these ceos, but give us a sense what the banks are looking for out of any sort of negotiation on capitol hill as we proceed towards the cliff? >> well, the first thing that the banks would like to see is some, you know, at least some certainty and stability about how we're going to, get through this process and come out the other side. because as we're looking at either cutting spending or raising taxes those have impacts on the economic activity that these banks are going to be participating in. so some conclusions and some
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certainty. it will let them understand and prepare for what is going to be over the next three to 12 months. shibani: we're getting more word here, more departures out of the white house. senate majority leader harry reid leaving right now. we'll come in and out of this conversation with whatever news we have. you talk about regulation and things that impact the big banks. what is your outlook for 2013 given we have a lot coming down the pike in the way of more rules and potentially more costs for this industry? >> well, you know, when we're looking at regulation, we've been in the process, you know, since we went through the financial crisis of adapting to new regulation. the banks have been able to, you know, double their excess capital, improving their overall base of capital to the point now that they're even meeting the basel iii guidelines for the most part. when you look at the stress tests and what we'll go in march they have been able to derisk their balance sheets and able to build capital so
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we can pay out twice as much of our incremental earnings we had last year. when you look at liquidity, we've been able to build liquidity on the balance sheets. deposit growth has been very strong. so for the most part we're looking at regulations forcing banks to be able to improve their balance sheet and overall risk positions. we accomplished most of what we have to do there. a lot of what we're seeing in regulation is operationally oriented. while it will impact expenses we believe the overhang of the credit as it works out and we've seen that in the last couple of years, will release a lot of those expenses. we'll see those efficiencies starting to build next year as well. shibani: let me ask you, marty, i'm seeing jpmorgan up 32% this year, bank of america doubling this year. was it that people oversold the stock or that the actual fundamentals justified price movements this year? >> well, when we came through 11 you did see pressure on the stocks as we went through the last financial crisis.
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going into 2012 there was room to recover and we saw that early on in the year but what we have seen is the fundamentals in the sense of earnings power continuing to grow 20% this year. we think we'll have another 15 to 20% growth this earnings power next year. so the fundamentals are improving as well as seeing a rebound from the low points we saw in 11. shibani: marti, thank you for being with us this afternoon. >> you too. david: we are following developments inside the beltway. they just had their meeting. the big question is, president obama's increased spending a lot over the past four years. how will he get the revenue from that? is raising tax rates on the so-called rich enough to do it? no, it's not. it doesn't bring in enough money. one the ways he might do it is to squeeze the energy companies a little more. coming up, ceo of southern company, one of the most important guys in the universe will join us right here to say if he expects the big squeeze from the white house.
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>> i'm david asman with your fox business brief and here east one crisis averted anyway. unions representing dock workers and shippers reached a agreement delaying a strike that could have cripple the u.s. economy. longshoremen and maritime alliance agreed to postpone for 30 days. this would mark the best year for the auto industry since 2007, but experts say the gains made in december could be overshadowed in january because of concerns about the fiscal cliff. the chinese government announcing stiff new rules and requiring users to provide real names to service providers. the move place as greater burden on web companies to inform of forbid inch post. that is the latest from fox
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business, giving you the power to prosper. we'll be right back from washington
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>> the white house meeting has concluded. congressional leaders are back on capitol hill right now. comments from house minority leader nancy pelosi she believes the meeting with the president and other congressional leaders has moved them forward. she said it was a constructive meeting, candid as well. she also indicated that the president was definitely trying to get the senate leaders to try to move a proposal first. it appears as though house speaker john boehner, as we said before, is waiting for the senate to move on some time of legislation. so it appears that the congressional action now moves over to the senate. this meeting started according to senior administration official with president obama reiterating a proposal that he had put on the table on friday. last friday, calling to keep tax rates where they are for income amount of less than $250,000 a year and to extend long term unemployment insurance benefits. that at least as itself would probably not be
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something that could pass the house. so negotiations would have to continue to something in the middle of what republicans and democrats are asking for, if there is any hope of averting the fiscal cliff. shibani? shibani: thanks very much, rich. we're also learning house speaker bain are is not in fact returning to the capitol. leaving the ball in the senate's court. if we do get any sort of statement out of any senators that were involved we'll of course bring that to you. david: well the president is always talking about math and it is just a matter of simple math things don't add up. well, he is right. increase of expenditures in his administration has gone up 25% from his predecessor. if we can put up the figure, the full screen that we have showing that. in 2008 we spent about $2983 -- $2.98 trillion. that went up as you can see in the next year primarily because of the extra spending with the stimulus program but it didn't really slow down. it just kept up at the increased level.
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how is the president going to get the money to fund his new spending? that's a question that our next guest has been thinking long and hard about. he is thomas fanning, chairman, ceo and president of southern company. he is one of the energy giants in the country, if not the universe. tom, good to see you. thank you for coming in. so you see the math very clearly. the president has increased spending about $500 billion. 500, 600 billion. the most that he could get by raising tack on all of the wealthy, not only getting rid of their deductions but raising their taxes is about 110, 120 billion. he is it still about 300 or 400 billion short. now the only way he can get that kind of cash is either by growth, growing at 3 to 4%. if you raise taxes you will not get growth. or, by going to you guys. we have had an energy boom in this country primarily because of fracking but also because of china importing a lot of coal you guys produce. do you expect him to try to
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squeeze energy companies for more money right now? >> look, david, great to be here. these are awfully important issues to america right now. you know the thing that strikes me in all this conversation, this is not a republican issue or democrat issue. these are in fact american issues. we know we've got to take costs out of the economy. we know that we're going to have to be flexible on revenues. but at the end of the day the only thing that will sustain this challenged kind of trajectory the economy is on is to grow. one of the big issues that we are facing right now as an industry is this notion of increasing taxes on growth capital. you know we operate in a globally competitive economy. you know that when we think about going off the fiscal cliff dividend taxes could triple. and that would have a significantly negative impact on our economy's ability to sustain growth. and think about, you know, this idea, this false idea, frankly, that it won't
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impact anybody that makes less than 250,000 or whatever the cap is you want. >> right. >> our average age of people that own dividend-paying stocks is about 65 years old. their average income is between 70 to $75,000. yeah, they're not subject to the $250,000 but in fact, if you reduce the after tax yield of these kinds of investments that people select because of their low risk and they use the dividends to supplement their retirement income, if you reduce the after tax yield, stock values drop. we have already seen that. david: because of all this breaking news i want to bring you back and i really want to focus you a little more specifically and dividend tax is something you're hot about but i want to talk to you about whether you're getting squeezed. i'm looking at 300 to $400 billion gap the president will have even after the tax increases. i think he will go after you guys in order to get it. we will ask you that question. we have to take a short
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break. a lot of breaking news out of washington. no clear what happened in that white house meeting today. maybe we'll have more news after a short break.
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david: we are back now with thomas fanning from southern company. he is the ceo and president. they make a lot of coal and of course a lot of that goes over to china.
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again, let's make it very simple here, tom, for our viewers. the president needs a whole lot of money, much more than the amount he will get from raising taxes. you guys in the energy field are in a middle of a bonanza. because of fracking primarily, we have this bonanza of natural gas. we have a bonanza in fracking for oil. you guys are doing well. the coal producers, shipping coal over to china. if i'm looking for money, i'm looking at you guys for money. don't you expect the president or congress or somebody to put the squeeze on you to find some way increasings revenues from energy production? >> well, look, they're going to being seeking revenues from wherever they can get them. it would be such a misguided approach to try and do that, david. we consume fuel. we don't create it or sell it. here's the issue. in 1960s or so, about 20% of gdp was driven by electricity. now it is about 60%. i talked before the
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commercial break about growth capital. think about electricity or energy broadly as growth capital. it is fueling a renaissance of manufacturing in america. why in the world would you want to tax energy that is going to serve to fuel our economic growth? david: why in the world they would want to do a lot of things cutting down growth. got to leave it at that, thomas fanning, southern company ceo and president. shibani: adam shapiro will be out of d.c. on "money" you know,that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needingo go frequely or urgent. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess withialis. side effects may include headache, upset stomach,
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