tv Squawk on the Street CNBC October 10, 2013 9:00am-12:01pm EDT
i'm carl quintanilla. david faber is in larue, texas this morning. whether it's yellen, whether it's the news that the president is going to meet with gop leaders, negotiators they're calling them this afternoon at 4:45, futures look pretty good here, jim. futures have had a nice couple of days, the nikkei up 2%. what do you make of what's coming later on? >> they went third rail this
morning. they said this is not about paying the japanese, not about paying the chinese, you're not going to get your social security check, doctors aren't going to get paid. i've been waiting for them to do this. that is devastating from even the most rock solid right-wing politician. but you can't go against soc-sack. the interest rate can go up and the japanese may not be paid. boy, they got rid of that. that's the jpmorgan argument, the bankers. no, it's now retailers. ling congressmen are going to be targeted. you can't get against social security. it's sacrosanct.
>> and secretary lew said do you want to pay veterans or social security? you decide. this is expected to go for maybe another half an hour. let's go back to capitol hill and secretary lew. >> the fact is that we have not dealt -- and in that compromise we dealt with discretionary spending almost entirely. we have not dealt with entitlements, which the administration seems to say are off the table and now we've got yet even more demands for greater tax hikes. and that's what the negotiations we want to engage in are about. >> senator, the president has engaged on multiple occasions. i've been part of those negotiations. we very much believe that a balanced approach where you do entitlement reform and tax reform would be good for the country. we tried in 2011, we tried in 2012. we're ready to try again. the president said when we take away the threat of economic disaster, he's ready to engage.
if i heard him correctly in his press conference the other day, he said he'd pay for dinner. so he's willing to talk, wants to talk, but it can't be that it's with the u.s. economy being threatened if one small part of congress doesn't get its way. >> so we need another trillion dollars or more of debt authorized before we can even discuss whether to start reforming entitlements, whether to start reforming the tax code? >> senator, what we believe is the government needs to open, congress needs to open the government and congress needs to make it possible to pay our bills and we need to engage and we're ready to do that. >> well, just to conclude my questioning then, back to the issue of our long-term debt and the threat that it poses to our economy, are you telling me those fears have now been allayed? >> senator, what i tried to say, and i hope i wasn't confusing, there's a challenge to deal with in the medium and the long term. it is not the same as a crisis, which is what happens if you
fail to act on the debt limit in the next short period of time. i would very much like to do it sooner rather than later. i think it's better for the country. it would have been better for the country if we had been able to complete the negotiation where the president and the speaker were very close until house republicans said they wouldn't vote for it. and we would love to be in a place where we were talking about a sensible alternative to these mindless across-the-board cuts. we've been very clear about that. but it can't be with the threat that the government is shut down and we're going to default on our bills. that is not the way to engage in the kind of bipartisan negotiations that need to happen. >> senator cantwell. >> secretary lew, thank you for your testimony about how you think that serious prospects and uncertainty to the market are right now. i guess that's my question to you because everybody's talking about default as if that's the triggering point. i think your testimony lays out that this moment could happen at any time. and i guess the reason i brought
this chart, if you're not involved in the financial market, haven't been in the business community, they're some mysterious thing. but this chart shows that treasuries are held not only in the u.s. by businesses but in europe and china and there's significant -- it's a network. it's as complicated and complex as just about anything that's around when it comes to all the individuals that are around. it's not, as one of our colleagues said, picking up the phone and calling wall street and telling them to settle down. so my question is -- i just went on the web and said what about treasuries? you just google treasuries and all of a sudden comes up the most important market indicator, way more important than the dow and s&p, how important a number it is as a number in the economy because of the interest rate being pegged off of its interest rate. and so here we are now basically
almost talking the interest rate up with the talk in d.c. and in the last 48 hours i wish i could print out this chart because we have seen a spike, a dramatic spike from .03% to .07%, more than a doubling in almost 48 hours. my question is if the interest rate on treasuries doubles in the next 48 hours again, aren't we already to that tipping point? >> senator, i have been trying to be very careful and just report what's happened. i'm not going to predict what markets will do. i do think if you look from last week to this week, a tripling of interest rates on short-term bills is not a good thing. we've seen stability in the long-term bond market. markets are a delicate thing. i don't know how markets will translate one day's news, one day's action into discomfort. what i do know is that every week we roll over $100 billion
of treasury bills and that relies on the market being open and willing to function. and i just think everyone has to remember that it's not just the interest, it is also the principal. the markets have to keep working. >> i think the thing is miss hearing in the d.c. is that everybody is at risk in the u.s. economy. it's not just what you explained but everybody at home. last time we had this discussion about whether we were going going to default or not, the stock market dropped 20%. so we could have this same discussion and then by friday or monday, you could see, in fact one of my constituents who is an analyst said you could see as much as a 25% drop in the stock market just triggered off of treasury. we don't have to go to default. just the talk of default is causing the level of uncertainty we're all trying to avoid. >> senator, that's what we saw in 2011.
we had an 11th hour agreement and we avoided seeing what happens when you cross the line. but we had the damage. we had the drop in the market, we had the higher interest rate costs. we also saw for the first time a downgrade in the u.s. credit rating. so that is what happened when we didn't cross the line. i don't think anyone should want to test what happens when we cross the line. we're seeing with the government shutdown that every day new things are coming out that are really bad. people who thought it was okay to shut down the government are now rushing open up one piece or another at a time. it would be reckless to see what happens when you cross the line and don't pay america's bills. >> i think what we're doing right now is reckless so i hope we'll come together. thank you, mr. chairman. >> thank you, chairman. senator roberts. >> thank you. pardon me. thank you, mr. chairman. i don't think we have a blindfold on and walking toward a cliff. i think we're walking toward a cliff with our eyes wide open
and that's the problem. all this talk about self-inflicted wounds, it was not a self-inflicted wound when we raised the debt limit -- >> we'll take a quick break here as we listen to some of the q & a. we're a business channel, jim, not a politics channel. there are a lot of crossovers here. business leaders saying they feel they've lost touch with at least the right part of the gop. everyone's writing about a fall. is that what you're seeing today? >> i think the pressure's on. one of the things i've just been amazed about, who really gets hurt about this? where's target? where's walmart? why aren't they saying anything? main street is recognizing this is going to affect us. this is no longer just about interest payments. that's the pressure on the gop. the paul ryan article yesterday
in the wall street journal was major. he said let's get away from -- >> without a mention of obama care, which we thought was the original -- >> holy cow. that was the key to say if you're the president to let's start talking. it's very difficult to go from hatred to love. there's usually an interlude where you say maybe we shouldn't go back together, let's have one more type fooit. it's typical for someone to come out and say the president is in transition, i'm still not going to negotiate and sunday on "meet the press," i hate you, i hate you, but there's something going on, carl. this market has correctly anticipated almost every move. i do sense that the pressure from the business world is not bankers. this is not coming from lloyd blankfein. >> grover norquist talking smack about ted cruz today in the "washington post." >> this is the big movement. chris matthews on last night, you mentioned right at the beginning this is not our kind
of story. but chris matthews on, he's got a terrific book about tip and the gipper, where we used to get together right and left. he said this is the beginning, you'll hear a senator, there will be a senator who emerges on tuesday with a deal. >> after the holiday. >> after the holiday. >> of course there's a chance they can't get it done in time. but now lew says we're just not going to send out any checks. you may think the 17th, the 18th is a phony deadline. we're not sending checks. >> we're going to talk more about what the trade is as a result of all these political moves in a few moments when the q & a ends. in the meantime, futures still looking pretty good. the market trying to anticipate annd game, even if it is a short-term raise to the ceilings. we're up triple digits in implied open and italy
year-to-day high. >> two years ago, the greatest trade in the world. >> we'll take a break and come back with more q & a in just a moment. your own path? who can build you a plan, not just a pie chart? who can help keep your investments on course, whatever lies ahead? that someone is a morgan stanley financial advisor. and we're ready to work for you. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason
extremely negative effects that the government shutdown and the threat of default have on our foreign policy and our national security. both now and in years to come. you know, the shutdown and the default affected some of america's near-term foreign policy priorities such as the president not being able to go to the asian economic summit. and his absence, although certainly appropriate due to the crisis, feeds into existing fears having traveled to the region, that are rebalanced to asia as more rhetoric than reality. and who showed up and was more than willing to fill the void? china. and in doing so, america's loss is china's gain.
this is an opportunity about opening markets for u.s. businesses to sell product and services. this is an opportunity to promote economic and security questions and i think our allies are going to wonder is the united states capable of meeting its promises, whether about economic initiatives or security initiatives? and perhaps the most damaging, i think, and difficult thing to reverse is the impact this has on america's reputation in the world and the economic consequences that flow from that. the entire global financial system depends in large measure on the faith that the united states government can and always will pay its debt. and america enjoys the unique privilege of having its currency act as the world's reserve currency. so it seems to me by playing
games, we give power to other emerging economies like china and brazil to rely less on the dollar and there are consequences. it puts our role in question with allies. i know in your role as secretary of the treasury -- did you give the committee a sense of the consequences, i know there are kwonss at home but there are kwonss abroad that affect us at home. >> i think it would be impossible to overstate the importance of the u.s. playing the role in the world that we do in terms of the stability we provide. the world actually counts on us being responsible and making the kinds of decisions that they can continue to look to washington for that kind of stability. up know, we have finance minister from around the world gathering in washington this week and yesterday i met with finance minister from africa and finance minister from latin
america, and it's challenging when they look at you and they ask what's going on in washington? it makes them nervous about their economies and we need them to have growing demand because that's good for our economy. on this question of world reserve currency, it's no secret that there are discusses around the world where others would like there to be a basket of currencies that might be used as an alternative to the dollar. i have to ask when our role in the world is so important to the united states' security and well being and to the stability in the world, why would this kind of a manufactured crisis be seen as something that is necessary to pursue when it undermines that? i think the questions you're asking are quite significant. >> let me ask you, there are those that suggest, oh, that's not a real issue because the rest of the world has no place to go. >> you know, i'm not going to speculate on whether someone else will emerge as an
alternative, but, you know, we are in a place right now where it's important for the united states and the world for us to maintain our position, and we have the capacity to do that. we have the economic ability to do that. it's only a matter of political will. >> and there's no reason to risk that possibility of continuing to find out whether or not there's some other universe of currency of which people to look to and there's no reason to risk having the potential economic impacts we can have globally that provide domestic opportunities for growth and jobs and opportunity. >> i certainly think there's no reason. i would go a little further and say that it is against our interest to invite that kind of discussion. >> thank you. >> senator ramsey. >> thank you, mr. chairman. mr. secretary. i think this is the 11th time i've been through this discussion about the sky is falling and the earth will erupt.
wyoming families aren't buying these arguments. they're saying you can't spend more than you take in. you definitely can't doing it forever and ever and ever. i've got a person that interned for me several years ago -- >> quick comment here as we listen to some of the q & a. a lot of stocks moving in the premarket. obviously we're watching fixed income today and what the 10-year is doing, back above 2.7. >> the banks are rallying. the bank stocks had come down in anticipation in perhaps there was going to be a cataclysm. i think people are taking cataclysm off the table for now. is that a wise strategy? there's so much peace talk that people don't want to be short the financials into the earnings. maybe the companies say, hey, you know what, things are okay, now that we've got peace, buy our stocks in. >> not to mention jpmorgan -- >> but i don't expect good
our bills. you and i have talked. you know i would very much like to be in a conversation about long-term sensible tax reform to give the stability going forward that this country needs. this can't be done by saying we won't pay our bills next week. that's what's wrong with engaging right now. the president wants to negotiate. >> we keep saying that this terrible thing is going to happen and this is just paying our bills. how many times can we say this is just paying our bills? the american public doesn't get that same option. they don't think we ought to get the same option. >> the time to reduce what we need to borrow is when we make the decisions on what we're spending, not after. if congress appropriates money and congress puts laws in place where people are entitled to benefits, if congress commits military resources, once those commitments are made, you can't
tell a contractor who is doing work i'm not going to pay you because we changed our mind. >> which takes me back that we should have been doing the budgets one at a time in a piecemeal fashion -- >> i'm not disagreeing with that. >> mr. secretary, it's getting close to 9:35. there are many senators who have questions. the senators have been very good about sticking to the limits. i'm hoping you can stay a little longer. they'll shorten their questions so that you can stay. >> it's going to be very difficult to go more than five minutes over. >> let's see what we can do. senator carper. >> mr. secretary, thanks for joining us. i just stepped out of the room for a few minutes. i was watching the hearing on television in an adjoining room. and i must say people watching this on tv must be frustrated, disappointed with us. some of the finest people who serve in the senate serve on this committee. that's why i wanted to be on this committee, thoughtful democrats and republicans, pragmatic, find the middle,
reasonable, principled compromise. >> they're doing our best to take a live mix of democrats and republicans because viewers want parody on that front, jim. >> do they want us in a hush golf voice in ooh, looks like netflix -- >> we have to pay some bills and we want to do them before the opening bell in about four minutes. we'll take a quick break and get you that bell in just a moment. [ male announcer ] once, there was a man
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with think or swim from td ameritrade. you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell set to ring in about a minute. you see the treasury secretary talking in front of the house finance committee. the democrats will probably speak today. after the close, the president meets with 18 gop negotiators. we have trades to make. what are they? >> some big dow stocks had meaning yesterday. hewlett packard changing their view, meg whitman showing stability. that's what she's saying. nike, obviously very good discussion yesterday about their core business. we're also seeing, by the way,
gilead. they made an actual trial stop because of a fabulous anti-lu anti-leukemia drug. >> and the nasdaq, which has had a rough couple of days, trying to find its way as some of those high flyers have come in a bit. >> they've been down 4% to 7%, some 10%. hard to keep those boys down. >> yup. there's a look at the s&p. you're going to see a lot of green this morning. down here at the big board, columbia property tus celebrating its listing on the nyse today and nasdaq, tractor supply celebrating its 75th anniversary. congratulations to them. you mentioned some dow components. boeing gets initiative at
canacord with a buy. >> try getting any of their planes. 10,000 orders now. have you ever been to one of those boeing factories? they can't crank them out. that's not canned soup! >> they do talk about r & d expense, maybe a bit of a cloud. some of the production levels going into 2015, 2016, not entirely clear but it is a buy. the price target 140. >> the gross margins go up per plane, the yield is better. a lot of pressure in the cloud to the because of citrics. you have to be a weatherman to know which cloud is going badly. it's being hurt because of government spending. champion chanos was talking about clouds this morning in an excellent "squawk." i have to tell you, i thought it was telling that group could be under pressure.
did you see how "squawk" has tomorrow? >> no. >> they have darrell from "the walking dead." isn't that great? do you think he's talking about the debt ceiling? does he have the cross bow? is he talking cabellas it? >> chanos was great. still short hp, despite what the stock has done this year. someone who knows a lot of these names very well, david faber at the barefoot in larue, texas. good morning, david. >> good morning, guys. we have steve tannenbaum coming up in an hour or so. you can expect we'll talk about some of the bigger issues out there, including the debt ceiling. we're also going to be talking oil and gas with will van lowe, runs one of bigger firms in the sector. that's the big story we keep trying to tell. as tore stocks, i'm watching and keeping an eye on liberty.
they're having their investor meeting today in new york city. they've announced a number of transactions that are typical for liberty, somewhat complex, although the easiest one is syria is increasing its buyback. they'll keep their level of ownership the same. they're basically raising money is what they're reallying do at lmca is what i would kind of leave you with. and that seems to be leading people down the charter time warner cable road a bit. let's keep an eye on those stocks. i haven't heard anything new to present to you that today charter is presented at the liberty meeting but will they say something? are they going to up the pressure again on time warner cable to come to the table to try to work something out? what could that possibly be given the divergence and sizes. keep that in mind as you look at the trading day ahead. >> the kyle bass interview about puerto rico, i saw today puerto
rico aqueduct -- i don't want to hurt the issuer but i was reeling from your interview about this situation. having sold millions in puerto rican bonds in the 80s, that is a big story. i don't know even know how to hedge yourself from it. >> it is a big story and it's one we're going to continue to follow. michelle caruso-cabrera has also been following it, jim. there are people on the other side of that trade, so to speak, and the other side of the argument to believe puerto rico will be able to figure out a way to raise more revenue, that they're in the process of doing that, that they will apportion specifically for interest payments. you got to remember of course there's both sides to it. the key question is with population declining, in san juan it's a larger percentage and there you have may have the higher income people. there's a question of how you
grow the economy, about $30 billion in unfunded pension liabilities. you can do the math. it does take to you a potentially worrisome place. >> sometimes to get these things out of left field, that's are the ones you have to worry about. >> subprimes, turned out those were devastating. what happens if puerto rico goes bust? there's a lot of money in puerto rican municipals. >> yes. and david did start a big debate about whether pore reuerto rico commonwealth or a territory. that is a debate for another time. >> david talked about the liberty thing. sirius, when you see the number of cars going closer to 17
million and you see they're getting in used cars, that stock is not done getting higher. >> ruby tuesday, higher than expected. comps down, almost a 19% move down, jim. >> it just kind of took my breath away. darden had bad numbers and activists got involved and darden goes higher. ruby tuesday is in a real secular decline. you know, i used to love to go there, fabulous salad bar, but i just -- david and i always go to ruby tuesday. david thinks ruby tuesday is probably a song by some british group. >> doi do remember that, yes. >> that is how i know it. it's true. though i have attended -- >> when i say "cloud," he thinks, hey, hey you, get off of
my cloud. >> hp, talked about being comfortable with their progress, pockets of growth in 2014. >> they came out with guidance a bit earlier than i expected yesterday. the stock up yet again better than some had anticipated going into the meeting at least. we'll see if they can maintain it and if they can maintain the positive tone that they seem to have set in the meeting, carl. 2014 is the key for this country. meg whitman has pointed to this numerous times since she began this turnaround. this will be the test of whether or not hp can succeed or whether they're going to have to go down another road at the end of next year should she not succeed. >> got that group going. if hewlett says things are good.
>> the gardner report saying not very nice things about pc shipments, 8.6% down from the same period last year. the numbers just continue to go the wrong way. >> you have to say, well, maybe this is the enterprise business and hewlett packard, their printer business is very, very good. there's a lot of belief that meg wlitman is a truth teller, she's not just blowing smoke, there's something going on at the company that's not expected. >> and finally last week kantor upgraded tiffany. today stearns takes it to a buy, talking about 400 basis points of potential gross margin expansion. >> the inflexion point is here. all the wealthy stocks, the stocks that rely on the wealth effect, have been under tremendous pressure. this is the kind of move you expect. after they come in, someone says
i'm going to start recommending this very fine company, reported a good quarter. by the way, big japan story -- big japan earnings. japan, the machine numbers came out last night and they were the best since lehman brothers. i thought that was significant. japan, you may not like the political of how they're getting the economy going but that's a very positive sign. >> david, what's coming up later on today from larue? >> as i said, we're going to be talk to steve tannenbaum from golden tree, a huge fixed income focused, distressed focus hedge fund. we're going to be talking about fixed income in the credit arena in particular. we'll talk about high yield and things of that nature and then oil and gas, just fascinating production that we've seen, the increases in production we've seen in this country are shocking. there's no other word to describe it in both oil and natural gas. we're going to try to figure out
where there's money to be made. >> you will be in antero today. jim chanos talking about winners and losers but there's more winners, i believe, than losers. >> we have a few ipos watching. bob pisani a over by post 8. good morning, bob. >> nasdaq up 1%, s&p 500, the dow industrials and transports all up 1%. early end cases, financials, discretionary up to the up side. this is antera resources, independent oil and gas producer. price was at 42, price is at 44. there and's some spirited bidding going on, $50 around there that it might open at. >> and this a master limited partnership, they raised the amount that they're offering,
prices to $22, above the 19 to $22 range. that is looking around $23, $24. spirited pricing today. right now we're talking about a short-term deal to raise the debt limit, keep the government maybe closed to work out spending cuts. it's a meager deal but people seem -- not surprisingly all the high beta names we talked about in the last couple of days are the ones rallying the most. so biotech stocks are doing very well today, some of the chinese internet stocks, these are trading names. they move around a lot because they have high momentum and high volume. facebook, netflix all are outperforming today.
jim, you mentioned the bank earnings tomorrow. we had disappointments today. ch chevron lowered. exxon down and the cloud computing store, they didn't say why what was going on. microsoft may be into citrix's base. they'll offer a formal earning statement in october. finally, the new york stock exchange has actually set a date for the merger with ice to actually finally conclude here. the date they're set now is november 4th. that is contingent upon them getting final approval from the five national regulators over in europe that's part of the you e
you're. >> rick: antero, a $44 price looking at $53, $54. >> that's a natural gas play. it's happening. it's happening. >> let's switch to bonds and the dollar. rick santelli is in the hot seat. there's nothing more important. go on, rick. >> i don't disagree. i think the bond market is important. i think studies and statistics and probabilities and outcomes is something to study as well. okay, yesterday was not the 12th day that 10-year note yields closed in a tight range. but before we go to the longernd of the market, let's pay some attention to the bills. every story is about the bills and rightfully so. look at a one-month chart of the one-month bill. clearly there's some escalation of yield going on as we hover around basis points and we were
given a goose egg followed by 1.5 basis points. can you see we're comping to about a five-year history where we have last seen yields in the mid 0s. and i'm just a market guy. but if things were as bad as they contend, where is the three-month bill? you can see it's at 4 basis points. yes, elevated a bit, remember scaling. but open the chart up for five years, it looks like a worm crawling around on a golf course freeway. it hasn't reacted. i think that has to be taken into consideration. back to the ten-year, yes, we settle at 266 yesterday, outside that 265 kang range. go to 945, that's the chart i've been showing. open ul another month to 824, can you put it in some perspective. the reason a lot of these
traders have done well by telling the treasuries is because they are watching how many people are buying the ek quits. it continues to be technically motivated to a high extent. look at how it had some nice liftoff off of sup-80 trade and indeed it is up on the day and it all seems to make sense when you look at stocks and interest rates. >> rick santelli, don't miss a special edition of power lunch. the debt threat a panel of experts will take your questions on how to protect your money now. tweet us the question and include the hash tag ask cnbc. and coming up, ron paul, we'll hear what he has to stay on the fed standoff and at janet yellen. this is obviously a long day ahead, as jim has said, but for
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just try looking for a dow component in the red this morning. chevron chevron managed to do it with some of their guidance. everything else, disney, boeing in the green. >> the refiners are up. you see holly moving up, valero. when people think about oil stocks, they're thinking about pioneer, eng. the santero, it used to be major tech stock. this is simply a play on the pennsylvania and ohio shales and it's acting as if it's got a cure for some major disease. and that just shows you the independents are so loved. i've been focused on the independents endlessly.
>> yes, you have been. >> i don't care. i think they have to be focused on. >> look, capital owned gas is you'll see the analog to antero. those are people thinking how do i capitalize on antero going up. cabot is a great play on marcellus. every day it seems like some new manager says there's an oil and gas renaissance. >> interesting. >> this is a guy who had a dream, he had literally a port he built. i went down to this area in louisiana to see it, it was meant to import natural gas. you shift it to an export play and cheniere has been one of the
plays. >> netflix is getting a little bit today. what happens after ostensibly say a deal is made next week. does this continue? >> historically it has for the high flyers, particularly in the fourth quarter, where people show i have genius. netflix out of dareamworks sayig they find it a god send. don't forget, we're going to begin the focus on twitter again. social media is playing a big role. you hear congress people and senators talking about the idea, well, i googled debt and it came out kerflewie. we'll be talking about yelp again and linkedin again.
the rancor doesn't end. it's like 007. that bomb has to go to 007. >> or mcgyver. >> why didn't i drill in my back yard when i was growing up? >> we'll get a lot more as the market is still up. here's what's next on "squawk on the street." >> coming up, there's no doubt that this market can be rough, but there are ways that it can be tamed, one of which is just ahead. six stocks in 60 seconds when "squawk on the street" returns.
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>> dress barn had a very good quarter. maybe it can go higher. >> citi goes buy to sony. >> they're saying hardware sales are weak. doesn't jive with best buys. >> couple things with netflix. the price target gets carted out by needham. dreamworks calling it the patron saints. >> one of the most exciting areas of the market are 3d printing. >> and decker is going to miss. >> this is a weakness in uggs. they report the last week of october. be careful. >> tonight what else do you have. >> i'm doings survival guide. i don't like to reveal which -- there's two. it's a fire and coal coalition i'm revealing tonight. >> this looks good, too.
>> and the giants i'm revealing, a whole new offense and defense. >> i like the "new york post" headline, just one, baby, meaning just one win. i'll see you tonight. >> thank you, carl. >> when we come back, former representative ron paul. got a rally here on wall street with the dow, up 183. make that 184. back in a minute. clients are always learning more
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♪ welcome back to "squawk on the street." our rope map begins with the debt ceiling. treasury secretary jack lew testifying on the hill earlier, saying there's no way of knowing the amount of damage that would be caused by a default. will washington be able to get a deal done in time? >> and a member of finance committee will join us live to tell us how negotiations are going on behind the scenes and if there are signs now compromise. >> plus sales of apple fall. >> and how will obama care
affect the health care industry in the long term? the former chairman and ceo of onyx will weigh in. jack lew, treasury secretary, testifying this morning saying congress should fund the government and end the standoff. senior economic reporter steve liesman is here with more on what treasury secretary lew had to say. >> reporter: we just got done with the hearing. there was a sharp exchange between senator pat toomey, republican, who has tried to pass prioritization legislation, which would instruct how to pay bills if we hit the debt ceiling and the treasury can no longer borrow. >> are you prepared to assure us but more importantly the millions who are investors in u.s. treasury securities and the
entire american economy that under no circumstances will you permit a missed payment on a u.s. treasury security obligation? >> senator, the only way to make sure we can pay all of our obligations is for congress to act and raise the debt limit. no president has ever had to decide whether to pay some bills and not others. >> i understand, that's a different question. >> the law is complicated and i am not the one who makes that decision, as you know. >> you would make the decision. >> no, no, it's actually not my decision. it is something that the president would have to decide. and i'm telling you that it would be -- put us into default if we went to a place where we could play one bill and not others. >> now, earlier in the testimony secretary lew was asked about this issue again of prioritization, how you would pay the incoming bills and whether or not that would constitute a default by the u.s. government. >> prioritization is just default by another name. it's just saying that we will
default on some subset of our obligations, but we are still -- by definition if we don't have enough money to pay all of our bills, we will be in default on our obligations. >> there was also discussion about the treasury's payment system and whether or not it could prioritize even if congress were to legislate that. and what lew said is we write roughly 80 checks a month, the system is automated to pay because for 220 years we've always paid bills. he said the system is designed to pay bills, not designed to not pay bills. back to you. >> we are reporting for something we've been waiting for a while now, boehner said he will ask the house gop for a short-term debt ceiling increase. the president set to meet with the minority caucus later today.
>> hey, john. >> reporter: what we're doing is the speaker is running those by his conference. they'll have a press conference today. nancy pelosi will have a press conference this afternoon, both parties will talk to the president. all parties are sort of groping for what it will taking what's the duration of the debt limb the increase, what's the duration of the reopening of the government and what is the structure of the negotiating process that's going to be laid out? the key demand from the administration is going to be you cannot dictate the outcome of that process. can you have a process and it can be time limited but you can't dictate the outcome. and what the republicans are going to try to do is portray this as a victory for beginning the conversation or increasing
the conversation on long-term deficit reduction, something that would involve the alleviation of the sequester cuts, which both parties don't like and a shift toward entitlement programs. key question is going to be which entitlement programs get cut. and the more those veer toward the issue of medicare and social security, which are so volatile, the more the administration is going to insist on some revenue from the republicans. they don't get that, you know we're talking about farm programs and other lesser cuts in subsidies. but it does appear, carl, we're reaching the chapter of this standoff that results in probably a solution before the 17th. >> markets are jumping because they see the potentially short-term deal coming together. but we're talking about six weeks. what happens? six weeks' time if we hit that limit again and there has to be renegotiation all over again?
any time we've been told in the past, whether 2011 or since that this time would be used to strike a major deal, it has not happened. and now that they want to roll back on sequestration, part of the reason it has come down, how can they agree to -- >> reporter: first of all, if they agree to sequestration, it would be to shift the onus of cuts from the domestic discretionary programs, defense and nondefense, which members believe have been cut too much already and shift them toward the things that ought to be cut, need to be cut, the long-term entitlement program. so that is not a retreat from spending reduction. but the key principle that the administration is trying to establish here, which i think that they can believe that they have established with a solution along the lines of what i mentioned is that they won't negotiate over the fact that the debt limit has to be raised and particular policy outcomes
before it's raised. so if you have a six-week raising of the debt ceiling, would we be back in the same situation six weeks from now? sort of. but if in fact they've gotten republicans to agree that the debt ceiling is going to keep going up, regardless of particular policy outcomes, then i think the markets can be calm and take some comfort in that outcome. >> that doesn't mean, john, that we're not looking at an additional six weeks of a shutdown, right? we're not talking about a clean c.r. here, are we? >> no, no. i don't believe the shutdown will go on for six weeks. i believe it will be solved in tandem. we'll see. there are a lot of hoops to be jumped through in order to get to that conclusion. but i believe when we settle the debt ceiling, we're also going to see a settlement on reopening the government. it's hard enough for john boehner, whose party is getting pounded by the public in this
standoff, it's hard enough for him to do this twice, do a retreat twice. better to do it all in one fell swoop and i think that's what they're shooting for. >> interesting. thank you for that, john hardwood in washington. we are expecting the president to have a news conference at 11:00. we'll bring at that to you live. >> some players that lend the government short-term cash are selling t-bills that are due to pay interest at the end of the month. notably fidelity, the nation's largest money market mutual fund manager. yesterday evening on cnbc, bill gross identified pimco as a buyer. >> if, for instance, there's a technical default of a day or certain number of hours, then a money market fund possibly has to mark down that debt do zero and it breaks the buck. so a fidelity money market fund might want to avoid that situation. pimco doesn't have that particular problem.
>> joining us now, andrew berkeley, head of institutional portfolio strategy at oppenheimer and george goncalves. gentlemen, good morning. >> good morning. >> george, can you argue that fidelity is being conservative. but on the other hand, were there to be a default, it's binary for them and they would be accused of having stepped out in front of a train. that's essentially the situation. >> it's prudent to do risk mitigation. that's happening across the money market industry. interest rates moving much faster. if you look out the yield term, it's short-term rate markets that are critical. for every buyer, there's a seller. >> the fear is -- we should explain the bigger issue is these t-bills are like the s cement through the system, what
people post at collateral. everybody is using these as the back bone. so the danger in the repo market, as they call it, is that a number of sellers emerged, false sellers perhaps, and that there aren't buyers nap is the nightmare scenario. are you telling me that's not an issue here because there are enough people like pimco who have longer time horizons? >> not necessarily. if this were to drag out and we went to a default window, most like li people would step back. but i think the news, the positive development today and the belief there is going to be always a last-minute solution is why people are willing to take the other side. >> or not as the case may be, as fidelity points out. >> yeah. i think in fidelity's case, they have a big retail, money market presence. there is a marketing, calm angle to that as well. >> what happens if i have money market funds in my 401(k)?
what should i do? >> certainly with the negotiations we're hearing today and the potential for things to start to calm, would i stay where we are in terms of the money markets and look to allocate that money more to equities as we go forward. that's been the big fund flow. money has come out of fixed income. now organizations like fidelity don't want to see that money going strictly to cash. they want it going to equity funds, which is the next progression in the bull market essentially. >> george, the difference between now and 2008 to some extent, while there are many but regard to what's happening in a short-term market, anybody who expects disruption don't question whether they're going to get the money at some point, it's just how much of a hangup is there. aside from this issue being resolved or not in the next couple of days or weeks, long term is there potential damage or change that's undergoing sort of whether it's repo or other securities where people are exchanging treasury bills? is there a chance they are no
longer seen as quite the safe haven asset as there always has been or is there no replacement for their function. >> i would argue for the last five years there's been chinks in the armor. at the end of the day you get to the conclusion of where do you park all that cash? and they're still going to pay you, right? so the '08 comparison to now is not fair, unless we work to default. it's a binary situation. '08 was a credit situation, a liquidity situation. this is something where the government finally will come through. >> for decades there's been a prediction the dollar would lose its safe haven status, that japan and china would no longer possibly buy treasuries. does this move the needle at all? both beijing and tokyo have warned the united states very explicitly over this. do you ha do you think it changes longer term where they will put their
money? it's one reason why the euro has been so mysteriously strong in a sense for so long. >> the capital flow will dictate if we're buying chinese goods, the dollar needs to be recycled. >> europe buys more goods from china -- >> so that will be recycled in that currency market. it's always a bit of a closed end loop. >> would you agree with that, andrew? >> absolutely. longer term they are striving to diversify slowly. something like this is not going to fast track it. >> good to see you, guys. thank you for coming. >> george and andrew, thank you. >> the obama care, changes have been up and running for more than a week now. how will that affect the health care history down the road? "squawk on the street" will be right back.
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joining us now from the forbes health care conference in new york is our own bertha coombs. joining us with the former ceo of onyx pharmaceuticals. >> thank you, kelly. >> we've done very well since i became ceo, it was one of the top ten pharma acquisitions of all time. i don't think you can ask for a lot more. >> you like to think of this as a deal of the decade. >> i think the deal of the decade is the way to think about it. we're so happy the products will go forward in the hands of a great product for patients. that's what it's all about.
>> reporter: over the last ten days, we've had two big government issues impacting health care. one of them of course being the shutdown. you're concerned in this shut down continues, if we go over the breach next week, this will really impact health care overall, not just research but actual care of people. >> one of the things we have to stay focused on as americans is getting the government back to work. it's so essential. there are a lot of risks in front of us if we don't accomplish that. the actual delivery of health care, and there are so many stories, bertha, there is an aging patriarch with advanced alzheimer's disease who is waiting to hear whether medicare will cover his skilled nursing care. think about the food and the safety inspections that are not happening the way they need to to protect us. yesterday we reported or there was report of a salmonella
outbreak. ordinarily inspectors get to this. to say nothing to the impact on research if this continues on for a while. >> as far as obama care also launching in terms of open enrollment over the last ten days, we've seen an awful lot of glitches, which has a lot of people worried about the jooverl implementation. what are your feelings on that? >> on any long-scale program there are going to be glitches. but these are moments in time. we have to let the moment unfold, let the exchanges get up and running and let the processprocess unfold, in a natural, organ being wic way. a few weeks is not going to hurt us. >> is obama care going to be good or bad for research? >> those are two different questions. the affordable care act is
providing health care for all americans and getting the health care they need. that's today's question. the question around research for the nih, the fda, centers for disease control, these are investments for tomorrow. we have to unlock the genome, for example, for cancer. we've got to invest in the next 30, 40 years. >> thanks a lot, bertha coombs. when we come back, sales of apple computer slipping 1% in the third quarter. will anticipation of a new generation of ipads keep investors upbeat about the stock? not getting a lot of traction today. we'll talk about it when we come back. it's as simple as this. at bny mellon, our business is investments. managing them, moving them, making them work.
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dea -- debt ceiling increase. more impressive may be the nasdaq, that's the best we've seen since literally april 10th and the best since june for the dow. although we have a long afternoon ahead of us, nice intra day gains, the speaker be speaking and we'll bring you that live. of the top five u.s. pc vendors, apple was the only company to post a decline in shipments. joining joining us now, kolin gillis. >> if you go back and look, pc
sales as a total of a down 17% from 2011. if you add the numbers, it correlates with tablet sales. they're cheaper and easier. the pc may be relegated to more of an office niche product. it may not get back to the 96 million units per quarter we saw years ago. >> is that okay from apple's standpoint? are they willing to let tablets cannibalize the pc? >> it turns out that maybe the pc sales, the halo effect, is not happening to the same degree that may have been expected. on the one hand we get a nice new revenue stream for tablets, and on the other we have pc sales slumping and that's a negative. >> potentially it's huge for apple. they have a much more powerful
ipad coming, 14 inches. they could also bundle in their suite of software packages, bundling in microsoft with word. this is very exciting. they could really move into the corporate arena and really dent microsoft's core business with the office suite. >> you're smack on the point with microsoft's office is very run valuable, not on from apple but also from google. if i were a microsoft investor, i'd be worried not only about pc sales but second derivative, which is office sales are likely to take a hit as pc sales continue. how about a hit is this for apple? they're still suffering from the price impact of other competitors such as amazon that have tablets for $139 or $229. google is coming in with $229. and even microsoft is trying to get into the game showing an rt
is priced less than an ipad. you're seeing android tablets have crossed over the margin. >> how do profit margins compare with the typical pc for apple? >> the phone is the highest profit margin out there. it's really the iphone company. we sell a billion smartphones total in the marketplace. it's a very high margin product. >> what are we talking about? >> the margins on tablets are second and pc's the weakest. >> because the volume is higher? >> and also because it's not subsidized by carriers. >> but even -- they're moving toward higher margins sales. is that not a positive thing for a -- >> well, it is. unfortunately they're going to
lose a segment of the marketplace and it is what it is. you can't be high end and low end at the same time. >> are we going to spend the rest of our lives between 480 and 500? >> i have a $500 target. so i see only a few catalysts left. i think china mobile will be within of them. we know we have a good september quarter, holiday sales. you got the buyback supporting it, it gets up to 500, there seems to be resistance. >> colin, thanks for coming in. colin gillis. >> we are now one week toward hitting the debt ceiling. speak are boehner is reportedly working on a compromise but will it win approval from the gop and ultimately get through congress. chuck schumer will join us with his take next.
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welcome back to "squawk on the street." we just got the department of energy's weekly storage report on natural gas inventories. the number coming in at 90 billion cubic feet, less than expectations, looking for 97 cubic feet. we are watching prices, they're coming off just a little bit. the last two reports have been very bearish, traders were shrugging that off, expecting the cooler temperatures to bring demand back on the market. and seeing this number a little
bit lower than expectations, that is a bullish sign. traders are expecting these prices to hold up a little bit longer than today. now expect the price of gas also to maintain what we're seeing. again, look i said, 375, in that level. >> thank you very much, jackie. on that note let's head to the barefoot economic summit in texas. top asset managers from around the world are gathering to discuss qe, global markets and where to invest now. our own david faber joins us from texas with a special interview. david, over to you. >> thanks very much, simon. i'm joined by steven tannenbaum, the chief executive officers of golden. we've discussed this, whether it's a formal meeting or informal. nobody seems to be that concerned or at least willing to
hedge the risk of us passing through the 17th and hit ting o passing the debt ceiling. >> because people don't believe either side is going to take it to the brink, even though they've taken it to the brink or as claes as they can, they don't feel they're going to let the economy go into recession and slow down materially because they can't come to an agreement. i believe they think they're going to be voted out of office if they do and that's not what their constituencies want. >> as an asset manager, is that the way you should be thinking. is there a reason guys are not thinking about hedging? we've had concerns about collateral chains and all the bad things that conceivably could happen after the 17th? >> from a probability standpoint, people believe, 90% plus, that they're going to figure it out like they did last year. i think the people who sold last year november/december regret selling. they don't want to make the same
mistake this year. >> does that worry you at all? >> from a -- we're pruning our portfolio to what we feel best about but we believe they're going to figure it out and feel pretty strongly as of today that that's going to happen. >> and that very well may. we'll see what we get. so many different rumors. let's talk about ideas. you presented them here last year. you told a group of people here your best idea, spanish madrid bonds was a good idea. this year you're focused on student loans, in particular securitized student loans from the privately made, not the government backed. but why? >> we think they're a terrific value. to just break up -- we're a credit manager and we folks on two parts of the market. one would be fundamental, loans and bonds and the other would be systemic where basically you have to have a macro event, could be a government on shut down that cause as recession, a
deep recession, which we don't think is probable but that's more sensitive to a macro event. a student loan would be in the systemic pool or structure products. and we believe that when you look at the losses on the season pools, that it is very remote you're going to have any hit to principle and yet you're getting 5 1/2 to 6%. on these pools, they're static pools, on just like a mortgage that's been half paid off, a lot of these student loans that are season seasoned have been materially paid off. as a result, the next time you have a recession, what we've seen with more seasoned pools, they tend to have much lower default rates than even what's the average for the newer pools. so we think that if you have a multiple of call it two times to three times the peak default
rates on your typical student loan, on a static pool it's twice that or call it four to five times. we think it's very remote and you're being very much overcompensated by the tune of knowing the selling bonds. >> let's talk, as we often do, in the short time we have left about the cycle. we've talked about credit cycles, you can be early cycle, middle and then be in that period where i think you say, i think your quote is i can't believe we just did that. where are we? >> 2008 we're in i can't believe i just did that and then we cycle to i think we're being compensated. route 21 is a retail bridge where the underwriters are going to take a nine-figure loss it looks like.
there's still some of that i can't believe i just did that but that's few and far between at this point in the cycle. i think we're seeing deals where people are saying i wasn't compensated for the risk i took. >> you prefer loans to high risk? >> absolutely. we believe loans are giving you a better spread when you track out for what you believe the return will be. we believe the world is becoming a better place and we believe the interest rates will trend higher and bonds are vulnerable to that. >> steve, we got to leave it there. as always, appreciate your insights. thank you. >> steve tannenbaum from golden tree. back to you. >> house speaker john boehner is expected to ask the house gop for a short-term debt ceiling increase. according to the associate press and other reports. he's about to speak in about a half an hour's time.
will that compromise win over democrats? let's bring in senator chuck schumer of new york. thank you for joining us. >> good morning. nice to be here, kelly. >> do you see the contours of a deal coming together? and specifically will you support any deal to raise the debt ceiling if it doesn't extend into 2014? >> well, i'd say two things. the good news, if speaker boehner asks for a six-week extension without anything attached is the republican party and particularly the hard right is at least saying this is important and backing off their stand that they have to attach something to it. the bad news is to come back in six weeks and go through all this again is a big mess. so we prefer it to be much longer, the longer the better. if they're already admitting that they should raise the debt ceiling without these political fights that they've been causing, then why not just do it for a good period of time and get it out of the way? >> well, because you may not be able to get some sort of deal, it sounds like, without each
side giving a little bit here. there is more pressure on harry reid this morning as well to be able to turn around and say, okay, if you agree to do that without any strings attached, then we will bend as well as. >> i think we all agree a longer term is better. we see real movement on the republican side. i think they're realizing they were playing with fire and we're going to fight to get as long a term debt ceiling extension as we can because that is the right thing to do for the markets, for the country and for average citizens. to go through this again with the perils of pauline aspects to it -- remember, kelly, the more times you go over it, the more the dollar is weakened as a current circumstance the less full faith and credit there is in the united states. if the markets think that these games are going to become routine, another downgrade is possible. within of the major rating agencies downgraded even though we didn't default last time but because we came so close.
>> are you saying the democrats would look harshly at a six-weeks extension? >> all i'm saying to you is we want it as long as possible. too do this every six weeks would be quite devastating to the markets. would it be as devastating as default? absolutely not. is there a better solution to look toward? absolutely. >> do you think it it would be done in conjunction with the government shutdown? >> that's another issue. to raise the debt ceiling for six weeks and not solve the shutdown is a problem. many of the republicans i'm talking to on both the senate and house sides want to do both together. i think that would make a great deal of sense as well. this is an opening offer by speaker boehner, it's an improvement from his previous stand but it's clearly not the i've deal solution or even close to it. jack lew was great at the hearing this morning. we asked him to come to the hill to deal with the debt ceiling deniers, people who say it doesn't matter or people who say
you can prioritize and it won't have much of an effect. the vast majority of experts, both on wall street and academics say that that doesn't work. lew said it very well. he said that rearranging the debt and stratifying the debt is in other words default. he said we don't know when the markets would react to this if we came to the 17th. i think it's a dose of reality for the republicans. one. leaders in of right-wing conservatives in the house is a guy named brown. he says defaulting won't matter, it's much less serious than governor deficits. he said a third of what he learned in medical school came from the pits of hell. we can't have people like that leading the country. in the house that's what's happened up to now and boehner's six-week proposal, if he offers it, may be a break from that and that is good news. >> so what is the correct way to lead the country at this stage? you will be aware that gallup
has just come out with a poll saying no political party has ever been less favored than the republicans, only 28%, 62% have a strong negative view against the gop at the moment. you're of the conviction that ultimately boehner will cave in. why not pitch it all the way. >> well, that's exactly right. the republicans are realizing -- the mainstream republicans, not these hard right people, are realizing the folly of their way. when the koch brothers come out against them, they realize they're having real trouble. so to just settle for the minimal solution is not ideal and we're going to push harder. we're going to push to get the debt ceiling as long as possible and deal with the government shutdown at the same time. >> senator, there is still an issue where if you put the obama care issue to the side for one moment, the country is split and there are a lot of people who are upset with the path of spending over the next decade and beyond. with the promises that have been
made through the entitlement system and that's where obama care again comes in. they're uncomfortable with our ability to be able to meet these obligations overtime. as part of any deal now, isn't it better to have some kind of grand resolution or, you know, effort to come together and bend that entire curve as opposed to striking a deal that basically reinstates the status quo, even if it's for another six weeks. >> let me make two points, kelly. first, we've cut the deficit in half. it's less bad as a percentage of gdp than it was a few years ago. we made significant progress there. there's more progress to make. a grand bargain would be great but you need two side of it. democrats have to give on entitlement reform and republicans have to give on revenues. the president -- please, kelly. the president has laid out a series of entitlement reforms he is willing to do. we haven't seen a single major republican talk about any revenues.
that's where the focus should be if you want a grand bargain. every time the grand bargain has fallen apart on the super committee, on the budget committee, on all the negotiations, it's been because not a single republican would agree to revenues and you're not going to get much entitlement reform unless you're raising revenues. not raising rates. they don't want to do that and i agree with that. but closing loopholes. >> okay. it could be an interesting six weeks, an interesting 24 hours. senator schumer from new york, thank you for your time. >> we are making some progress so thank god for that. >> the markets seem to think so. >> the dow is up 20 points, back above 15,000. the s&p almost 25 points. we're basically looking at the best day, at least intra day for the market since the spring. one of the best performers on the s&p is best buy, spiking on some news that is not easy to find. we'll tell you why after a short break. (announcer) at scottrade, our clients trade and invest
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welcome back to "squawk on the street." consumer electronic retailing giant best buy is jumping higher. now, the move is being helped along by a research note saying the number of customers they plan to shop for products at best buy continues to rise from the same time last year. now best buy shares have been on a tear. they're up around 230% just so far in 2013. so, guys, at the nyse, bby shares certainly ones to watch. back to you. >> that would seem logical if you have so many products in the playing field. that's great for best buy. >> it's amazing to see the run that company has been on this year. a different story from so many of the other retailers, carl, that seem to get into this death spiral. >> yeah. meantime the dow keeps adding to the gains, up 212 now. the vix coming in at more than a
2% decline, as a lot of traders on twitter and elsewhere saying you got to love a short squeeze. this is really a short squeeze as they've gone so far this year. >> the s&p 500 up 1.5%, its best performance of the year except for january 2nd, if we stay up at these levels. 25 points is a move we've gotten more used to saying on the dow, up better than 200 now. >> only one day so far this year has been better today for the s&p and that was january 2nd, as we got into the new year fiscal cliff, there was a flush of relief coming out of that. we'll see what happens after boehner speaks. >> up now 17% for the year. that's an extraordinary performance. extraordinary performance. >> want to keep an eye as well on t-bill yields. that will tell us how much stress is coming off of that. still ahead, ron paul will weigh in on the government shutdown, the debt ceiling and what washington needs to do to get a deal done. yes, we will hear from ron paul. "squawk on the street" continues
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remarks at that very podium. we'll bring it to you live, and we'll see if it holds or if perhaps there is selling on the news. meanti meantime, rick santelli. >> hi, carl. thank you. you know, one of the big topics around here in 2011, the last time we had somewhat similar kind of intersection going on with government, i remember one of my favorite discussions with some of the gang is that it's very difficult to fix a car when it's moving. it's difficult to adjust a transmission or put on a fan belt when the car's running. it's different -- difficult to do open-heart surgery on a jogger while he's still jogging. you get what i'm saying. well, i think david malpest today said it in a more financial dollars-and-cents-type fashion. the article, the opinion section of "the journal" entitled "the bigger battle behind the showdown." and the highlighted quote sums it up. you'll see where i'm going. a staggering $250 billion per
month, 80% of spending, runs on autopilot without congressional control. let's get through the rancor, through the biases. let's acknowledge that strategies may be flawed. let's try to look at what's incubating beneath all this for years, and that is the notion that if spending is on autopilot, and the economy, the biggest and most efficient in the world, there is no pause button, a static moment to actually go get inside this and try to tweak it. and in between these short-term fixes, it's impossible to get anybody to sit down and get anything done. so basically what he's saying is that of all of the funding for many of the entitlement programs is automatic, it doesn't need separate appropriations, we're all learning about how the old days used to have a much different style of appropriations than we have now in these budgets, which we don't have, turns into resolutions where everything is bundled together. it's hard to do what the president said. and what schumer said, senator
schumer, that they want to do, and attack some of the autopilots, and then think one-sixth of the economy is going to fold into this is another autopilot, and we already know that behind all of the anxiety is a simple notion with the debt ceiling. we can't afford all the things we promise, because we take in less than we spend. now, that's cutting through all of the rancor. that's the reality. and if we think the part that we can get at, the discretionary spending, is going to make that up, we are kidding ourselves. so, yes, people can make fun of all of this. but think of the long-term implications. and if you really want to hear it said even better than that, i have a santelli exchange extra. go to cnbc.com and type in "santelli exchange extra." and back to you. >> all right. thank you. 200 points on the dow. i want to make the point that as we await speaker boehner's news conference -- let's go to that -- let's take a break and
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>> all of wall street thinks they'll reach a deal, because if not, we'd be a lot lower. i think the consensus is, there was a small probability of a deal not happening. but it wasn't zero. >> just know when the president took office in january 2009, we were in the middle of the worst recession since the great depression. we were in the middle of two wars and a deficit 9% of our economy. we've cut that in half. we're making progress. we have more to do. >> lew has changed the conversation. what lew said, look, we ain't -- we're just not going to send out any checks. you may think the 18th, 17th is a funny deadline. we're not sending checks. that's the death nail for anybody that's saying we should continue to shut things down. there's so much peace talk that people don't want to be short the financials into the earnings, because maybe the companies say, hey, you know what, it's okay, now we have peace, fire stocks. [ bell ] >> from a probability
standpoint, people just believe, it's 90%-plus, that they'll figure it out like they did last year, and i think the people who sold last year, november to december, regret selling. they don't want to make the same mistake this year. >> we see real movement on the republican side. i think they're realizing that they were playing with fire. we're requegoing to fight to ge long a term debt ceiling extension as we can. ♪ >> good thursday morning. we're live here at post 9 of the new york stock exchange, and what a day it's been. the second-best day of the year for the dow and the s&p. the dow up almost 200 points. we're right around 15,000. we're awaiting house speaker boehner to speak in just a moment on what we expect to be a request to the house gop, kelly, for a clean debt ceiling extension and perhaps six weeks. we will see. the vix has gone from 21 to 17. that t-bill hump, as they're calling it, appears to be
flattening out a bit, too. >> this is a classic by the rumor, potentially sell the fact. a lot of people saying, wait a minute, we haven't heard an announcement. that's true. we're waiting to hear from speaker boehner if, in fact, he does say he will ask the gop, carl, for an increase in the debt ceiling. the key question, and this is something john harwood addressed the last time, are they going to accept a clean debt ceiling hike this time around, or is this a signal that the gop is softening its stance, and will potentially continue to agree to raise the debt ceiling in the future? that will be important. >> right. this is also a precursor to perhaps a more important meeting after the close, around 4:30, 4:45, where the president will meet with about 18 gop negotiators, although the white house doesn't want to call it a negotiation. let's get to john harwood in washington, and talk about what we might expect from the speaker in just a few moments. john? >> reporter: i think the speaker is going to let us know exactly what terms that he is going to pursue the short-term extension of the debt limit on. you know, democratic aides last
night were saying that they'd been assured by the republicans, or been hearing from republic s republicans, that there was not going to be unacceptable provisions from their point of view added onto that request, this was an attempt to actually move it in a way the senate could take it. but we're going to have to see exactly what the speaker's been able to sell to his members. and i do think, you know, carl, you were talking about the meeting this afternoon at the white house. i think that's less important than a couple of things. the internal meetings within the republican caucus in the house, and also the conversations that are going to take place, that have been taking place between the house speaker and the sen e senate -- democratic leaders, aides, and the two principals -- ultimately when they sort of work out what the terms of this extrication of the u.s. government and the united states from this crisis are. >> john, the focus does seem to be shifting that way towards harry reid, for example, and we had chuck schumer on -- i don't know if you caught that in the last hour -- who again seemed to be indicating, well, they're coming around to our view.
>> reporter: mm-hmm. >> is that the risk now, we'll need to see some compromise from the senate and potentially they feel as though they don't -- that the democratic leadership feels like, well, they're playing pretty good hand right now. >> reporter: the democratic leaders and the president feel they are playing a good hand. and what they're -- what they're arguing is that, yeah, fine, we will have some negotiations and we'll agree on a framework for negotiations. but we're not going to concede the outcome of the negotiations before the threat of a debt default and the burden of the government shutdown, or limit it. i don't think you'll see democrats coming off of that. and i think the movement you've seen from republicans is in recognition of that. is an indication that they're -- they have concluded they're not going to get the repeal, the defunding, the delay of obama care, and they're not going to get substantive policy outcomes, among other reasons, republicans don't know themselves what they want from those budget discussions, and that's why, kelly, we haven't had a budget
conference all year. even though the senate did pass the budget, as the house has insisted earlier, just a few months ago. >> john, obviously, there's been internal strife within the gop. grover norquist, in the "washington post" today, saying, quote, i think it was very possible for us to delay the implementation of obama care for a year, until ted cruz came along and crashed and burned. how much damage to the gop brand? you've just tweeted you think they'll look back at the past year and said -- and say to themselves that they went backward. >> reporter: well, look, we'll see when we get the nbc/"wall street journal" poll, which comes out this evening, what that damage has been. but it's clear from the polls that we've seen so far that they've taken a hit. the president's also taken a hit, but the republicans are the ones who have a real brand reputation problem in national politics. i think grover's wrong. i don't think they could have delayed the individual mandate for obama care.
but there's going to be a lot of rekrim nations on the republican side, even out in, say, the state of utah. you had a conservative leader, former state senate elected official, in utah, saying mike lee, the republican senator, has damaged his effectiveness in the senate with what's happened, his alliance with ted cruz, on this. so again, we're not out of it yet. it does look as if the republicans have decided to extricate themselves from the mess that we're in. the democrats will have to try to manage that effectively and help them do that. and once that happens, there will be a lot of infighting on the republican side. >> john, brand obama has not, you know -- it's taken a hit, as well. no one's unscathed in all of this. the president -- >> reporter: that is correct. >> -- is included. a lot of people take issue with the way that while he doesn't want to negotiate over the issue of the debt ceiling, kind of turned that into a "i will not negotiate with the gop" and the way in which he repeatedly used his bully pulpit to attack the
republicans instead of kind of laying out more of a vision that might appeal to more of the country. >> reporter: well, clearly, the president is taking a hit. you could see that from the way his numbers have eroded in the last few weeks. it's not good for anybody. but it's not -- it's not true that the president won't negotiate with the republican party. he's just not negotiating in this particular circumstance. and if you look at the polls, about who's more reasonable, who's more willing -- to work with the other side, president obama comes out way ahead of congressional republicans. so he's in a decent position on that question, even though republicans have had some effectiveness in the last few days in saying, "well, he won't talk to us." the president walked into this fight with a big advantage on perceptions of who is a reasonable and willing to work with the other side. >> while we're waiting for the speaker, john, let's bring in former texas congressman, gop presidential candidate, ron
paul, who i believe jones us on the phone. congressman, good to have you back. good morning. >> thank you. nice to be with you. >> how would you characterize the way the republicans have handled the standoff? are you happy about what we expect the speaker will say? >> well, i think it's pretty irrelevant, because i think both parties are doing the same thing. they're grandstanding. they're politicizing this. they talk about a shutdown, which really isn't a shutdown. the big stuff continues, and they close down the monuments. and i think it's all a political game and it's a blame game. you know, even with the deficit -- the deficit limit was met in may. so government goes on. i think that the shutdown is not a real problem. i think the real worry should be the breakdown of the entire system. and as far as default goes, we're always going to pay the interest. and that's just -- that's just a fake argument. i'm concerned about the continuation of the default by
paying off our bills with money that has less value. that's where the real problem is, and they're not even talking about it. >> senator, shutdown leaves kin of dead soldiers without money for funerals. it's not a big deal? >> well, it's a big deal, because it's totally unnecessary and the administration does this. there's no law that says they have to do this. if they can put money back on every -- there's a question of degree. you're right it's not as if t the -- you know, better than half of the government is still up and running. but there's still, again, going
back to the issue of whether you give aid to military families for funerals, these kinds of things that get caught up, because people are out there saying, oh, the shutdown isn't a big deal. well, in some ways it is a very, very big deal. >> yeah, it is. and that's why you should blame obama, because it's arbitrary. he can do whatever he wants. they don't do whatever they want now. if foreign aid qualifies as necessary, you can't cut one penny. you'd think he could take care of the veterans. so that's just a political game. i can't imagine anybody buying into this, that it was the republicans' fault for not doing what the president told them that the veterans are suffering and these benefits are removed. that is all pure, unadult rated politics, and i think that's why the american people have a rating -- not low for the republicans and not low for the democrats -- but for the government. the government is not credible in foreign policy. they're not credible with the federal reserve policy. and they're not credible with bailing out the economy. look at where the economy is. if anybody thinks the economy is booming, they have another thought coming. but people -- government's lost
their credibility. and all we argue about is whose fault was it. it's both their fault. it's the nature of government. too much spending, and they're not serious about cutting back. this talk about cutting back is not serious any way whatsoever, because i think both sides want to continue the spending, or they would agree -- you know, they would stop the foreign aid or something. but they stop nothing. it's always politics, only politic, that's all you hear about, and the american people have the right to be very upset with it. >> well, either that or various political supporters, the cover of "the new york times," congressman, talks about the big business, the national retail federation and others feeling that they've lost touch with the right part of the gop. do you think that's a fair characterization and how would you go about remedying it? >> i would say look to the markets and see if they're worried. the stock market is up 200 points. the dollar in the last couple of weeks is not weak. they don't believe this stuff in
the short run. i'm always looking at the long run, the destruction of the dollar, the default that we're in the middle of, the bond bubble, which is about to burst. and we continue the process of big government, domestically and internationally, and depend on the federal reserve to monetize the debt and whether you have summers or yellen, you're going to have the same ole pollty -- policy -- print the money until doom's day, and they'll get doom's day, because you can't print money forever. >> the people on the hill, congressman, as you know, we understand, i think a lot of our viewers know where you come from strategically, but people are talking about tactical moves. do you vote for this proposal that the speaker's about to give, for instance? would you be in favor of that a short-term extension? >> well, i don't know the wording of it, but, no, the point ought to be made, to put the brakes on, the only way to put the brakes on is not just willy-nilly create the debt limit fully realizing it doesn't
do anything but slow up the government spending. think of the bailout position. who bailed out most of the people around the world, the banks, and -- it was the federal reserve. they spent trillions of dollars. so this whole idea that things will continue for our dollar and paying our debt. so it continues. i think people have to see it in perspective. they have to eventually ask the question, do we want the role of the government of being the policeman of the world, have runaway welfare spending and print money when you don't need it? if you don't challenge that, believe me they'll argue and fuss over there, they won't admit this country is technically bankrupt and are depending not only on borrowing but of printing money. that's a foolhardy attitude to have, and they'll all be sorry and the american people better blame the whole system, the philosophy, kezzian economics, the violation of the civil liberties. that's where the problems with. yet they're arguing about whose door gets shut down. they better worry about the breakdown of the system instead
of whose ox is being gored for one day or two. and not pretending -- not pretending that october 17th is "d" day. you know, october 17th is pure fiction. nothing really changes. the debt limit went over in may, and they've continued to illegally fund all of the programs. so it's -- it's game they're playing. and the people are glued to it. and markets move up and down on it. but right now -- >> yeah. >> -- the markets aren't that worried about the shutdown, and worried about the october 17th, and they shouldn't on the short run. but i'd like to have them think about the long run. >> you could have added fire to jack lew's testimony this morning, congressman. >> that would have -- that would have been fun. >> okay. ron paul, former texas congressman, gop presidential candidate, ron, thank you very much. >> you're welcome. >> the dow is still hanging onto gains here, off of of the highs. we'll take a short break. hopefully, when we come back,
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welcome back, as we wait to hear from boehner. stocks are off the session high, but still a strong rally across the major indices. 189 points for the dow. the s&p 500 up 1.3%, 21 points on that index. the nasdaq, the strongest of the three, up 1.7% at the highs, a little bit off that now. we want to get perspective from ben willis, and, first of all,
do you make anything of the delay? >> the delay from boehner walking out? >> sure. >> yeah. i mean, it's -- what i find interesting, you just had ron paul on, washington watches the tape. and the dow -- the dow industrials up 180 points is a great voting booth, and it's telling washington, and boehner has their blackberries out, this is what the world needs to see. >> the rumors that they are going to come out and say they'll agree to raise the debt ceiling. >> sorry to tell the rest of the world, wall street trades on rumors. here we are. the rumor is, we're sending a clear signal, go ahead, don't screw this up. we've let you have the microphone long enough to play the games you've played with, with the american reputation. don't get this wrong, get it done. >> others might argue, i mean, ron paul's point just now, wall street is not worried. 5% off the high. that's not a disaster, ben. >> no, it's not. again, the anticipation was that it was going to eventually come to some sort of conclusion. but as you mentioned, the vix
index, the vix was trading up, because a vehicle, a professional investor, doing the fiduciary duty, protecting the gains that they've already had this year. that's starting to come off. because we saw -- we saw it trade up in anticipation of, well, it might happen. now it's coming off, on the rumor, that, okay, we're right, it's not going to happen. >> you think that go-long volatility trade is done for now in. >> for now, yeah. and i -- we were -- i was on with you probably last month or so thinking that the vix was a place, if i was going to put money in the market, i'd be buying that insurance. it was a great trade on a hedge on a long portfolio. that seems to be coming off. you may see a pop in that again when we start going back to the tapering discussion, as well. but i think the idea is we had a 5% correction. yes, i would have loved to have seen a 10% correction. we had it. so some of the trade is coming off of the vix trade. >> let me ask you this. again, it's interesting to think what might be happening behind the scenes now. but if it is just six weeks that
they're agreeing to raise the debt ceiling, that's not really a game changer. that is the ultimate definition of just kicking the can down the road, unless the six weeks really does buy some kind of time for a grand compromise. what does the market make of the scenarios? do they love -- is this a one-day reaction? because there's hope of a deal, or are they really saying this is it, this is enough in. >> no, this can be viewed as a one-day reaction to a continuation of a correction that i think is necessary. but again, that doesn't mean i'm bearish. i think at the end of the year we continue to go higher, that the 18% gain is something that we could look forward to and more by the end of the year. but again, it's -- it's become an understanding on wall street. we know washington is going to continue to play the games, and as long as we put microphones and cameras in front of them, they're not going to do the business they were sent there to do. >> well, but a lot of them see this as the very business they were sent there to do. remember, there's a lot of people who are representing constituents who are unhappy with the size of government, who
are unhappy with obama care. this is not just a media event. >> and that's great. when was the last time they sat down across the aisle from their counterparts and actually discussed doing something about it rather than stand in front of the microphone -- >> right. >> -- about how the other side is not doing it? >> that's what i'm saying -- >> we now how that -- >> shouldn't we be skeptical we should get -- >> one big question is why gold has been such a bust -- ooh, somebody knocked down that platform. why gold has been such a bust of a trade in the face of all of the fear that we've been through over the past ten days. >> i have to tell you, this is uncomfortable for me, because i don't really understand gold in the big picture. it's a pretty little thing that makes a great doorstop. if you're buying it for some sort of protection against the armageddon, you better be buying copper and lead first, meaning bullets. i don't understand the gold trade. again, you're seeing money flows in and out of it, because it's a safe haven. it's a knee-jerk reaction to the people that have been in the market for a long period of
time, when there's some -- some doubt in the marketplace, go to the u.s. treasurys or gold. that's -- you're seeing the ebb and flow of the dollars. >> correct me if i'm wrong, though, but gold has not been responding well to the flight to safety move this time. every day we saw pressure into safer assets, we did not necessarily see a bid in gold. why is it getting sold almost as a growth proxy, or is it a liquidity play? >> i think it is more of a liquidity play right now, the money that's stayed in the commodity funds. there's been a huge outflow of commodity funds on the world stage so to speak. and gold and oil had participated in that. oil is a similar action, seeing some of the sell-off. it's liquidity leaving the play itself, rather than -- i'm talking to david william, strategic gold, he's saying he's still seeing a great drive in ownership of physical gold, not so much in the stocks and the paper. >> interesting. reuters now saying the president is willing to look at this proposal to extend the debt ceiling for six weeks, but insists the lawmakers end the
government shutdown, as well. of course, john harwood does expect the two to be decided in tandem. we will see. it's been great fun waiting for the speaker to come out. we will take a quick break. thank you, ben. >> pleasure. >> hopefully, when we come back from commercial, the speaker will be at the mike. a lot more "squawk on the street" is back in a minute. i love having a free checked bag
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-- good-faith negotiations over the long term debt drivers -- or the drivers over our date, over the security that we need for this country as well as the pressing need to open up this government again. that's why we're going to offer legislation that will -- that will offer a temporary increase in the debt ceiling to allow us some time to continue this -- this conversation, because it is time for solutions.
the democrats' unwillingness to have this conversation has actually resulted in a delay and an ongoing government shutdown, and it's hurting the american people. it's gone on too long. we hope that the president will choose negotiation over crisis, leadership over inaction, and dialogue over silence. it's time to solve our problems. >> you know, the president is found of saying that no one gets everything they want in a negotiation. and frankly, i agree with that. nobody gets everything they want. but over the course of the last ten days, we've been trying to have conversations with our democrat colleagues. they don't want to talk. the president doesn't want to talk. we've tried to offer bills that would reopen parts of the government only to have them rejected by our counterparts over the united states senate. so what we want to do is offer the president today the ability
to move, a temporary increase in the debt ceiling, an agreement to go to conference on the budget, for his willingness to sit down, discuss with us a way forward to reopen the government and to start to deal with america's pressing problems. listen. it's time for leadership. it's time for these negotiations and this conversation to begin. and i would hope that the president will look at this as an opportunity and a good-faith effort on our part to move halfway -- halfway to what he's demanded -- in order to have these conversations begin. >> you know, the american people expect both sides to sit down and work out their differences when you're operate in a divided government. so i'm pleased today we've had an invitation from the white house to actually begin to do that. and, you know, we have seen now for ten days a government shutdown. it's not what we asked for. it is what was the result of the
two parties not being able to sit down and talk. and there is very little time left -- we cannot waste anymore time. and what we have discussed as a conference is a temporary ext t extext -- extension of the debt ceiling in exchange for a real commitment by this president and the senate majority leader to sit down and talk about the pressing problems facing all of the american people, and that includes a broad array of issues. we look forward to that happening. and if you look throughout history, presidents who have governed in a divided government have all sat down and talked with the other side. it's about time this is happening. >> i'm very hopeful for today. this is something that republicans have been waiting for quite sometime for. we never wanted to shut down. that's why our very last bill said let's go to conference, so
that door has always been open. we're thankful the president is willing to talk today. we're coming there with an idea of working together. we're coming there to find common ground. to find common ground that will deal with these economic drivers that harm the economy. the drivers that continue to add debt. so when we make an offer today for a temporary extension, we're looking for a structure that puts us on a path to get a budget, to take care of the debt and move the economy in a stronger position and have all america win. a little common sense for the rest of the country. >> and i'll take a couple of questions. >> mr. speaker, now that you're undertaking this plan on the debt ceiling, what do you need in order to reopen the full government? >> that's a conversation we're going to have with the president today. and i don't want to put anything on the table. i don't want to take anything off the table. that's why we want to have this conversation. >> mr. speaker, what's the agreement that will prevent
us -- (unintelligible). >> clearly, you could end up in the same place. we don't want to be there. listen, i think the president wants to deal with america's pressing problems, just as much as we do. but in order to deal with these pressing problems, we've got to sit down and have a conversation that leads to a negotiation that begins to solve these problems for the future and for, frankly, our kids and our grandkids. >> mr. speaker, will you reopen the government if the president doesn't agree to -- (unintelligible). >> -- ands and buts were candy and nuts, every day would be christmas. [ laughter ] >> well, at least they can still laugh in washington. that is the speaker of the house, john boehner, saying that they will ask the gop for a short-term increase in the debt ceiling. if, in fact, the president agrees to go to conference and talk about spending measures. john harwood is in washington. john, did boehner just blink? >> reporter: i think so.
i'm not sure it's boehner blinking. i think it's getting his conference to move. i think, you know, the speaker said it's time for leadership, and i think we saw some from the speaker, in getting his people off of the limb that they were out on, on obama care, offering to do a short-term extension of the debt limit. we'll see what the particulars are, how long it is, whether there are any conditions attached that were not apparent at the news conference. and then the related question of when you reopen the government. but i think -- i think the speaker is pulling his members back to a position where they can have a conversation with the president. and if that conversation yields a great or grand or mini bargain, that's something that everybody can be happy with, if, in fact, they can deliver. >> john, markets are obviously more concerned with the debt ceiling element of this than with the shutdown. the shutdown continues. even though both cantor and
mccarthy said it wasn't something they really wanted, there was no mention that would help move it. do we understand it will be implicit in some kind of deal? when will this thing end? >> reporter: well, you heard john boehner say we'll discuss that with the president. so i think there are multiple chapters to the resolution here. and i think that will be discussed. and i cannot imagine a situat n situation -- in fact, the president has explicitly said he's not going to negotiate on anything until they reopen the government and raise the debt limit. so i would expect that that to be the follow-on announcement from the speaker once they agree to some framework for discussions. but we're going to have to wait and see over the next 24 hours or so. >> all right, john, thank you for that. with that, the market has gotten essentially what it expected all morning long. holding onto the gain, up 194. a shade below 15,000 on the dow. a lot more "squawk on the street" is back in a minute. ♪
welcome back. big moves in the market. the dow is now up better than 200 points. 1.6% just about for the s&p 500. bob pisani. we're going to say what's moving here, but it seems like everything. >> that's right. it's 5-to-1, advancing-to-declining stocks. the dow, sitting near the highs for the day. the 90% upside days. 90% of the volume to the upside,
5-to-1, advancing-to-declining stocks. much less stress in the system. what do i mean? look at the vix, the volatility index. i've noted for the past several months, the front month has been generally much higher than months out. called backwardation. you can see that it's still a little close, but the bottom line is the vix is starting to go back towards its normal curve. that indicates less stress in the system. another sign of less stress, all of the old leaders are back. so biotech, health care, broker dealers, airlines, the market leaders, they're outperforming today. economically-sensitive stocks, cyclicals have been hit badly. they are the market leaders again today. this is what i mean when i say that there's been a lot less stress in the system. what's not helping much, big oil's down. chevron had an oil -- essentially a warning there, the problems in the refining division. that's down. that's hurting exxon mobil. that's not helping things in the dow. a big day for the ipos. we had a bunch of them, including macroagagenics, and to
and shale plays in one of the cases, they're all doing very well today. back to you. >> all right, mr. pisani, thank you. let's bring in david, with deutsche bank. and jeff is chief market strategist with lpl financial, a couple of stock guys when we have big moves. welcome. >> thank you. >> david, first to you. what do you do with the market here, especially if six weeks from now we're talking about yet another deadline to raise the debt kreeling? >> sure. i think this morning secretary lew did a good job of reiterating the 17th deadline, not taking risks beyond that. that raises the chance of a deal in the next few days. however, if we don't get a deal now, monday, i think markets will be redisappointed and the s&p could be down 30 points again, back to where we were just yesterday, the day before. so the risk is still on for the short term. i'd advise investors to act tactically around the s&p. i think we get a deal done
before a default. and we get good third quarter earnings and the s&p is at 1,750 by year end. >> jeff, is it clear sailing? or will we be back in this situation as david is talking about? >> listen, we've gone from a game of kick the can to nudge the can. we're getting a few weeks at a time. what it does tell sus that default's off the table here. realistically, no one expected it anyway. this is clear now what the gop's concession here, the default is truly off the table. that means the risk profile, the vix, more likely to see the highs we got to yesterday on the vix. so i think you can expect the vix to come down and the stocks move higher. i think you can buy now. you don't have to worry about the next six weeks, because the biggest negative case of default clearly off the table. >> although you still -- it takes you back to fundamentals, guys. earnings season hasn't gotten off to the most auspicious start, david. >> well, it just started. >> i know, i know. >> it begins next week, the week after, particularly when nonfinancials start reporting.
we're finally going to see healthy earnings growth and healthy top line from the nonfinancials of the s&p 500 this quarter. you'll get 7%, 8% from the s&p, the best in over a year. 6% earnings growth from the nonfinancials and also the best in almost two years. jeff said it first. kick the can down the road, as an investor, what's to be excited about if it's a six-week deal. >> i said nudge. >> i'd like to have this can kicked over a mountain. >> yeah. >> yeah, i just have this mental image of nudging the can, jeff, thank you for that one. david, appreciate it, as well. we appreciate your time as we watch one of the best moves, we've seen, in fact, for the indexes all year. >>. >> the new government-run health care exchanges have experienced set backs. one former health care executive believes it will transform the industry. that seems inevitable. let's head to new york, the forbes conference, and joined with with bertha coombs, ron williams. hey, bertha.
>> hey, kelly. thanks very much. ron, thank you so much for joining us. now, you are involved in private equity, rw2, the second chapter. i want to get your sense of how things are going given the rocky start of the healthcare.gov exchange. how do you think that's impacting insurers now? >> i think insurers are all set to go. they have their staffs standing by. they are waiting for applicants, waiting for feedback in how they're positioned and how attractive it is to consumers. i think the exchanges themselves have gotten off to a rocky start. and i think as a brand, it certainly has not helped build brand credibility with the initial launch and execution. long term, i think it's noise. i think it will all settle out. it will work itself out and we'll get to see how the exchanges perform skblchlt this morning during the panel, you talked about the fact you think we are really at an inflection point in health care. is aca part of that inflection point? >> i think aca is part of the
inflection point. i think one of the things that aca did was legitimize the broader transformation of the health care sector both by government but by the private sector. hospitals, officials, physicians, feel it's time to step up to create more value in the system. aca is focused on access and hopefully will make important improvements in giving people access to health insurance. but what really is important is how we create more value. if you think about what we spend as a country, what we spend is equivalent to the entire gross domestic product of france. >> that's incredible. >> a big number. we all know that. you need a way to grasp how big is that number. i think we'll see innovation, see technology, clinical investments, use of outcome data, and a real opportunity for new winners and unfortunately, new losers in the system. >> we'll talk more about that and you'll be able to watch that on cnbc.com.
right now, if you want to know more about how the insurers are navigating the new exchange situation, check out cnbc.com and i have a piece about your former company, aetna, being very aggressive. >> all right, bertha, thank you very much. with ron williams. when we come back, move over, russia. later this year, the u.s. will take the top spot in one key area of the global economy. with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform.
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coming up on "halftime report," the latest on the debt trade. and two of the traders debate which stock is the better buy ahead of earnings, jpmorgan or wells fa s fars fargo. and john will trade treasuries with the threat of default looming. kelly. >> all right, scott, thanks. the u.s. is well on its way to global energy domination. first, though. let's look at markets, carl. major indexes are showing major gains, towards the highs of the day. 225 points on the dow. let's see, 1.6 on the s&p 500. 1.8% on the nasdaq and the breadth here, as bob indicated, shows advancers across the board. >> and you don't see 26-point move on the s&p too often, just
a couple of times this year. as kelly said, the u.s. is well on its way to global energy domination. later this year, the u.s. expected to surpass russia as the world's top producer of oil and natural gas. what does that mean for the u.s. economy? our david favor is in larue, texas, with more. hey, david. >> that's right. a good place to be, texas, when you're talking about oil and gas. i'm joined by will, a private equity firm that makes investments, of course, throughout that complex, so to speak. will, always a pleasure. we had you last year. we talked about the revolution. it's only picking up steam, isn't it? you told me, 840,000 barrels a day were added last year. >> that's right. >> biggest increase since 1955. >> right. yeah. you know, it's really -- it's the unconventional technology, the horizontal drilling, the fracking was just on the gas side. but we're using the same technology to unlike oil reservoirs. and the growth has been extraordinary. >> what does it mean for a consumer?
we all wonder, okay, we're producing so much oil. we may become energy-independent by 2020. that's only six years away. yet oil prices seem to be stubbornly high. >> if you look at it, we've grown production in the u.s., you know, about 50% over the last four to five years. and at the same time, we've, you know, cut foreign imports about 6 million barrels a day over the last seven years. that's over $200 billion a year of additional money staying here in the u.s. that we're into the sending overseas anymore. so, you know, i think it's -- you know, the impact is going to be profound. on our economy. >> what about oil prices? when will -- do you believe they will start to moderate and/or come down as a result of how much we're producing, not to mention we're not consuming quite as much. >> right. if you look at it, world growth and demand, historically, has gone up about 1.4 million barrels a yearment but after the big financial crisis in 2008, really that slowed substantially and it's been going up to 800,000 barrels a year. and so, when you look at the
u.s., the u.s. is actually producing -- it's supplying all of the additional supply that the world needs to meet that demand. so, you know, when we look at it, we look at the fundamentals, there's a very reasonable, you know, scenario, where you could -- if we have any slowdown in a global economy, you know, opec production, surplus capacity at a multidecade high. and so, you know, you combine the slower growth and demand with the surging, you know, growth and supply, you could be setting up for a pullback in prices. >> all right. let's talk natural gas, of course, talking about pullbacks. saw an enormous one. some have moderated. what's the demand me kwigs? there particularly is coal coming offline, replaced by natural gas fired electricity plants. >> yeah, that's the -- gas has fallen over 70% from its highs that we set in 2008. and it really kind of found a floor in the high twos, $3 a year or two ago. and so, when you look at that,
and low prices stimulate a lot of demand. and so what you've seen is a tremendous move in demand, you know, on the electrical side, electrical generation, you know, about 70% of the increase of all of the additional gas has come online, has come into the -- you know, the electrical generation. and so, that's really the big story for gas is, we've got tremendous demand drivers setting up on the electrical generation, as we continue to retire the aging coal fleet in the united states, it was will supply most of the incremental, just the natural demand, about 1% a year in electrical generation demand. but we also have l&g that's starting to be -- we're going to export l&g in this country. and as those export facilities come online later this decade, that's going to be another huge, you know, demand driver. so, you know, you start to see where we've got -- we've got a good supply base, but demand could be growing faster than supplies. >> right. all right. a lot of sobering comments here, as is typical at barefoot on the
broader economy. but this is certainly one of the good news stories in a lot of way. will, as always, appreciate your time. >> appreciate you having me. >> from quantum energy. >> yeah, you would think the setting would do more to lift spirits. it looks beautiful down there. david, thanks. straight ahead, t-mobile ceo john ledger joins us at post 9. you really love, what would you do?" ♪ [ woman ] i'd be a writer. [ man ] i'd be a baker.
all morning long awaiting the speaker at 11:00 -- i'd say 11:30 a.m. we thought there might be a bit of a sell-off. it hasn't happened. now session high, up 230. s&p is up almost 28 handles to 1,684, busting through what some have called some resistance around 1,680. we'll see what happens this afternoon. in the meantime, t-mobile has been trying to shake up the cell phone industry over the past year. phase one was abolishing two-year contracts and subsidies and phase two was the jump anytime upgrade program and last night, t-mobile unveiled phase three, adding unlimited international data to simple choice customers at no extra cost. t-mobile's ceo join us for a first on cnbc interview. good morning. >> good morning, carl. >> good to have you. >> why do this? are there enough users who travel enough for whom this is a real issue? >> well, i would say, carl, even with this brick of a phone that you carry -- [ laughter ] -- this would be -- this would be an issue. what we've been about is solving
customer paying points. when i first came in, what i was about was listening to customers and i said this to you before. they hated contracts. they hated so much about the carriers. one of the things that's a big issue is people are petrified about using their phone as soon as they cross a border. and these have become so critical for us. and i think what we've -- what we've realized, try this out. 40% -- 55 million americans travel -- 40% turn their phone off before they leave, usually yelling at each other, "turn your phone off." 20% more, favorite statistic, said they would turn it off if they knew how. and the fun part is that what we have done is we have provided free international data roaming and texting to countries and 20 cents per minute between those countries or home. >> a hypothetical. last year my family came to visit me in london in christmas. they're on verizon. they arrived trying to set up some sort of international
calling plan only to find out the phones didn't work at all. you're saying if they were t-mobile subscribers, what would happen in that case? they could -- >> two things. one, see, this is designed for u.s. travelers. so, for example, if ultimately somebody spends, you know, 289 days outside of the united states, this isn't the plan. i'll give you a second piece. we did announce a second plan called stateside international talk and text. for $10 a month, what you can get is a subscriber in the u.s. is never more than 20 cents a minute to 150 -- >> in the u.s. making calls to other numbers. >> right. what about if you leave the country? is this only people in the -- >> now, if you're a u.s. person and you leave the country now, you get international data roaming and text free, no more, it's 20 cents a minute to any other simple choice country in the world, or home, and the interesting part is the cost of this is free. so technically, if you're a customer of t-mobile right now,
when you wake up on november 1st, this is on your phone. you don't have to do anything or pay anything. the stateside international talk and text is the outbound. the point i was going to make is we added something in. if you terminate to a land line in 70 countries, it's free. so if your mother lives in india, and you wanted to call her and you're a at&t customer, for $10, you can talk three minutes. if you have the cheapest rate plan, can you talk for 30. with ours, you can call and lay on the phone for the month if you like. the last thing, carl, if i could. >> quickly. >> what we announced is 200 million pops of lte, so the network is nationwide. it's testing faster than verizon and sprint. and in 10 of 20 cities in the u.s., we're faster than at&t. so we have the plans, you now have the network. >> you need the spectrum, i suppose. >> next game, yeah. we have spectrum now, for several years. we know to load the spectrum, and that's an issue soon. >> all right, john, thank you. >> john ledger.
>> they're not the only high performer. the markets surging. the dow and s&p, now having the second day of the year. plenty more on the rally when we come back. on december 17, 1903, the wright brothers became the first in flight. [ goodall ] i think the most amazing thing is how like us these chimpanzees are. [ laughing ] [ woman ] can you hear me? and you hear your voice? oh, it's exciting! [ man ] touchdown confirmed. we're safe on mars. [ cheers and applause ] ♪ hi. [ baby fussing ] ♪
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my impression, kelly, amazing how quickly all of the high flyers, the gileads, netflixs have come back, and leading the s&p. >> still slightly lower for the week, but more of this action, and we'll soon be positive. >> still have to get through the meeting with the president and the gop, that happens after the close tonight. in the meantime, back to headquarters. scott wapner and "the halftime." carl, thanks so much. it's a sea of green on wall street. the second-biggest rally of the year for all three of the major averages. as you look behind me on the s&p 500, heat map, nearly every single stock in the s&p positive, but a handful. here's the sector heat map today. the financials, the industrials, the discretionaries are leading the way. good to note, the s&p leading 44 points to erase all of monday and tuesday's losses. not quite there yet. but certainly appears to be on its way to doing just that. welcome to "halftime." here's what we're following. the lone wolf, fixed-income guru, john, on how to trade
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