good morning. going for growth. two key reads on the economy today. a final read on third quarter gdp and november existing home sales. oil output, unchanged. opec ministers deciding to leave things status quo at a meeting in angola. and the markets at this hour, u.s. equity futures pointing to a positive open. extending yesterday's gains as the santa claus rally is expected to continue and "squawk box" begins right now. good tuesday morning. welcome to squawk here on cnbc. i'm carl quintanilla along with joe kernen.

becky does not have the day off, joe, but she's not here, either. you're aware of this? >> yes, i am. and this doesn't happen a lot to us. we have an early wake-up call. >> yep. >> we really don't oversleep. >> no. >> i don't even need an alarm. >> you're going to wake up regardless. >> yeah. >> but apparently this morning -- i mean, it happens to the best of us. >> she's on her way in, though. >> she's going to get a little ribbing from us, i guess. she gets in, gets makeup, she should be on about 8:45 if she arrives immediately. no, that's -- i'm thinking about somebody else. >> some other network. >> no, there's some other people that might -- here -- anyway, go ahead. >> on the agenda today, a number of economic releases. 8:30 eastern, we'll get our final read on third quarter gdp. forecasters suggest the report shows a downward revision of 2.7%. economists suggest less construction activity and lower

inventories subtracted from a bit from growth. that's going to be an interesting number. we've got some other things hitting the tape later on today, joe, as well. >> we do. and the interesting lead piece by the yield curve, really steep, which might not -- >> steeper than ever. >> might not seem like a great thing, but it is a great thing. it means that people know we're coming out of this stronger and faster than people thought. it makes you wonder. the fed is down there on the short end. it's nice. the banks are recapitalizing. but you know, eventually, spending a lot of money and we're going to have to issue -- we're going to pay more on the interest for all the money that we're going to have to raise to spend on all this stuff. >> yeah. >> 0 o'clock eastern, we've got existing home sales. it's going to hit the tape. economists predicted retail sales will rise to the highest levels in three years. sales probably rose 3.3% last month to an annual rate of 3.6 million. the opec ministers meeting in angola today.

opec's president calls the current priels of crude very comfortable at $73.43. we've seen crude tick up the last couple of days, joe, on some of these tensions in iran and iraq. the cold weather, of course, in the northeastern united states. but no, they're saying absolutely to change in output at the meeting today. >> that's what they said the last time, 80, that was the perfect price, wasn't it? >> yeah. now it's 73. >> it's a very good area for us. not great for dubai, but for the rest of them, they're cleaning up. they can take us to the cleaners. anyway, from commodities to the fixed income, the treasury yield curve widening to a record. the key investor optimism is at its highest level ever. it signals that traders are now expecting a stronger economic recovery than previously. they're expecting the same economic recovery that is stock market has been telling us since

march and then again in july. and it's flying in the face of all the people that said -- people that get mad when i just ask, why are you -- you know some of the people i'm talking about? >> bears? >> yeah. the bears on the economy and they get really -- they get a couple of decent calls. and you just ask, you know, are you sure that there's no underpinnings for the market? and they're absolutely sure. >> the market was discounting pretty good times in '07 and then things changed. >> i know that's true. but there are times when it's not different and, you know, we're going to recover and the economy is -- it's strong. >> yes. >> it's strong and i'm the decider. >> you have decided that. there's a couple good pieces in the times today. >> i haven't seen that yet. >> saying there's no economy like the u.s. economy. there's no economy in the world that's better at reinventing itself. >> the times said that? >> yes. i thought there was no economy in the world where the rich have so much and everybody else has

so little. that's not in here today? >> i think it's the roger cohen piece. we can talk about it later. >> do you want to? >> why yes. >> david brooks, the "new york times" conservative. just because he wears a bow tie, he's supposedly a conservative. >> moody's is cutting greece's debt from a1 to i2 today. moody's is the third major rating agency to doirchb grade the greece country's rating this month. today's one-notch downgrade, lower, lower than expected. if moody's eventually follows suit come the end of next year, banks would no longer be able to exchange greek government debt for cash in ecb refinancing operations. so despite the greece downgrade, markets really around the world sort of have been passed that. >> it's easy to get stuff to run when you're talking about greece, isn't it? >> you mean -- >> tape. >> individual rvideo. >> when you're talking about

greece, this we know is greece. look at that. it's gorgeous. >> it is. >> there there's nowhere else where -- >> that is krete? >> that might be -- i had dinner there, down at the harbor. it begins with a p. >> it's beautiful. >> it's nice, except there was a lot of trash in the streets recently because all the garbage workers went on strike. athens, cover. it was awful. >> let's check on the equity futures this morning. >> why don't we. >> looking pretty good. we're back in black for december, markets positive for the month. 15-month high in the nas. yesterday, the dow's biggest jump i think since the beginning of the month and the s&p within 52 points of a high. dollar, joe told but what's happening with the yield curve. the 10-year at its highest since august. that's 37. >> 43? >> people were saying 1.50 was the next target. >> carl, the market has been

going up with the dollar. maybe that's -- that hideous relationship is finally ending? >> the ip verse relationship may be eroding. >> only the carrier trade is commodities is going up. >> unless it's year-end closing position kind of stuff. >> keep saying that. we'll build up the -- yeah. and still questioning why any of this stuff is happening. there still is a lot of skepticism around and people point that out, that even the bulls are ready for a -- you know, they've got that 10% correction in the back of their pockets. >> just like in july, people were saying 10%. we got that. >> i think it would be exciting to see some of these guys that say 1350 who is -- 1350 on the s&p by march. >> that's right. others are saying maybe year-end. >> but remember the other scenarios that have been painted the first 50% of a comeback is total disbelief and not

supported by anything? >> and government aided. >> and the next 20%, 25% is the relation that things are getting better and that we will add jobs again, and then the last whatever amount is a bonus. that's the irrational, the part that doesn't makes sense when it goes to sharply overvalued levels. but we've had people describe that to us and we watch it, but we don't know that we're watching it as we watch pit. >> as darda and you said yesterday, with it's beginning to look more like a song. >> you started that. i wanted you to do it. you know what we're going to put together for our viewers. >> you're going to play piano and i'm going to sing "blue moon" with an open tux shirt. i'm going to get a candy cigarette. >> that's going to be a good day. >> let's get overseas this morning. chloe cho is standing by in singapore, but first to europe with carolin schober who has the

latest from zurich. >> risk appetite is slowly congress back to the table, but but obviously, volatilities are very low. let's take a check off where they markets are trading. the ftse higher by 1%. the cac and the dax higher by rough lly 0.5% here. we have some recent economic data out that could limit those gains. in the uk, british gdp fell by 0.2% in the third quarter. that's smarter than expected upward revision from the latest estimate of a decline of 0.3% and data showing that the german consumer sentiment is likely to decline in january, so consumers are cutting back on those big ticket items. moving on the to sectors here, oil and gas stocks are moving higher. the banking and the pharma stocks are putting on gains here. as you mentioned interestingly, greek banks are moving higher.

they're showing the biggest increases among the european bank stocks. the national bank of greece moving higher by 6% here. the moody's downgrade of greece debt here, that was smarter than expected. many investors had expected a downgrade by 2 notches, now moddy's only downgraded them by one notch. now let's get an update on the asian trading session with chloe in singapore. >> thank you very much, carolin. clearly a mostly positive picture with the exception of the greater china region. the shanghai composite is lower by 2.3%. japan putting a pretty good performance today, up by 1.9%. the weaker yen at 91 versus the u.s. dollar. that is a two-month high for the u.s., certainly helping a lot of the exporters there. so we saw the nikkei closing at a three-month high. take a look at the kospi. it's the effect of tech stocks, the nasdaq market rallying to 14 and 15-month highs.

didn't translate out in south korea. tech stocks are missed. we had a huge bump up in some of the ship builders as well as nuclear power plays. there's a lot of momentum, there's a lot of expectations, that korean consortium that maybe a $40 billion nuclear construction project in the uae, a lot of indicators seem to be suggesting the big announcement could be made sometime this week. take a look at what happened in australia. up by 1 many 5%. we, of course, have a lot of m&a activity trickling in the coal mining space and that gave some of those commodity stocks a boost there. banking stocks had a pretty decent performance, as well. the hang seng, the hong kong market actually snapping a five-day losing streak, up about 0.7%. plenty of bargain hunting going on. but the hang seng back up above 21,000. let's get to the shanghai market.

down 2.3%. a seven-week closing low. it is dangerously close to that psychologically important 3,000 level, just about 50 points away. we may see bargain hunting ticking in, but still, so much worries about what the government may do as far as tightening is concerned. once again, banks and properties bearing the brunt of the sell-off today, so the shanghai market closing at a seven-week low. before i send it back to you, the japanese government coming up with its monthly outlook. what's interesting to note is that they kept their economic unchanged for the month of disease, but cap ex rose for the month before. so that seems to be creating new debate on a double dip especially on the back of those numbers we saw a day or so ago about whether japan can avoid a double dip in japan. and let me send it back to joe, right? >> yes, chloe, sent it back to me. you can call me joey, chloe,

joey, if you want. >> choey joe. >> the e is pronounced in chloe, but not. >> joe. >> that's a very good point. thank you so much. >> you're welcome. see you later. let's get to our tuesday task force. who is first? robert dye, he's an economist, a senior economist, in fact, at pnc financial services and william greiner, chief investment officer of scout investment. i'm going to start with you, robert, and talk about what we had at the top of the show, and that is that maybe this recovery is not as different as previous recoveries and maybe we get some job growth eventually, maybe it makes sense, the yield curve is getting in a lot steeper and maybe the fed needs to take its foot off the gas. what do you think? >> joe, we're only 11,000 jobs away from a positive jobs report. so i think we'll likely see that when the december numbers come out. maybe a small positive here. we're seeing all sorts of

positive feedback loops start to engage. this is looking like maybe not a robust recovery, but the classic feedback loops are lining up, the classic mechanisms are coming into play. and i am expecting to see an ongoing sustained recovery through 2010. >> how are we growing right now and what will the number be in 2010, do you think? what can we do? >> in materials of gdp, some place between 2.5% and 3% for the year. not a great number, not a terrible number. still a lot of hangover effects from the recession. but like i said, it will be a sustainable recovery. >> so you're not in the stretch spring sharper bounceback, you're in sort of -- there's still some structural problems from the left that are going to haunt us? >> certainly. and a lingering high unemployment rate through the year and the various drags on credit metrics because of that. >> bill greiner, do you agree with that economic back drop?

and is the market at this point reflecting what robert just said? >> pretty much so, joe. and we're thinking that the economy in general is going to show decent growth, probably a little more growth than what your other guest is suggesting, at least in our view. we're also believing that people are probably a little too concerned about the employment picture. we think we'll probably see job growth starting sometime in the next couple of three months. and our view currently holds that we're going to see unemployment down by the end of the year next year and have -- let's call it an eight handle on it. we think that there's going be some good job creation. we have to remember, not only the census hiring from the government is going to pick up a lot of slack, at least temporarily in the employment picture, but in addition to that, we have an election year next year and the government is going to do almost anything they can to get as many bodies back to work as possible prior to the lekdz. >> all right.

so the equity markets right now, for the rest of the year, let's say they stay relatively flat where they are in and around current levels. where will they end 2010, bill? >> i believe we're looking at between 7% and maybe 10% higher. we're in an e-driven market now where pe ratios are going to be challenged, we think, by the end of this coming year with rising -- slightly rising inflationary pressure. the yield curve is basically saying that to you, that not only are we looking at a positive economic environment going forward, but there is a risk on a worldwide scale seeing inflation surge to the upside, to a certain degree. nothing like the 1970s. but to a certain degree. if that happens, you're probably going to see a certain amount of pe contraction, and earnings have to come through. our outlook is looking for earnings do be above 20% in 2010 versus 2009. >> so the fed, when should it start easing up on the gas or has it already started? >> well, i think the fed has

already started to reverse out a lot of the quantitative easing, the bond buying program that they've said is going to end by tend of the first quarter, that's on track. the various liquidity programs, the credit easing facilities set to unwind, the demand for that falling off and then the last thing is going to be an increase in the fed funds rate and traditionally the fed would start to increase the fed funds rate about six months after the unemployment rate peaks. so i'm looking around september for the first increase in the fed funds rate. >> really? not until then? then we're going to have a steep yield curve. we could still see the long end sell off even more. we're already at a record. do you think the yield curve is going to get steeper and steeper? >> it could potentially get steeper than that, yes. >> some anecdotes in the journal. in the past, the curve different reach its peak until we're well on our way back from recovery. >> so that's good and bad,

right, robert? saber res happy. sabers will do a little better and banks will do a lot better. but we're still selling a lot of stuff, right? >> savers are better. it does allow the banks tory capitalize. i think there is some concern here about the bond market versus the stock market. 2010 might not be so good for the bond market. i would be more bullish on stocks, maybe saying the s&p 500 finishes up maybe in the 10% to 15% range by the end of the year. >> but bill, let's say you get 5% or 6% on a ten-year. that's pretty good if you're only expecting 7% in the stock market. >> that's just in pricing, joe. that doesn't include dividends. so i think looking at dividends, we're looking at somewhere between 9% and 12%. i think we're looking at a normalized environment for the equity market as far as total return next year. i think another thing to think about with this steepness of the yield curve, golly, compare this

to what japan has gone through in the last period of time and the silver lining of this crowd with rising interest rates is the economy basically is healthy enough to support a rise in an interest rate kind of picture. with that in mind, people try to compare what we're going through right now with what japan has gone through over the last 20, 25 years, we see significant differences. we think the journ downturn will turn into a historically significant different issue. >> some of the ardent bears, like rosenberg, pointed out that japan has had 50 60% rallies in their stock market since the whole disaster began? >> well, yeah. if those guys are going to be right, it's going to be a w. it's not going to be an l or whatever they were forecast b pl. >> yeah. because the middle of the l is going to be -- >> yeah. it's going to have to go back down. we've got enough data points to see that the bear, the worst bear scenario did not come to pass, right?

>> well, that's right. and i think 2010 is going to be a healing year for most economies. certainly europe looking a little bit more shaky than the u.s. right now. japan, maybe a little more shaky. but there's a lot of momentum coming out of other asia. china roaring right back to 10% gdp, india not too far behind. there's a lot of melt yumm building out there. >> and that is a little different than previously. gentlemen, thank you. appreciate it. thank you. >> robert and bill. >> when we come back this morning, your business and holiday traveler's forecast. a lot of people getting ready to hit the road this week. plus, boeing is getting ready for its second test flight today.

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. welcome back. the futures are looking pretty good. we had green arrows in china, green arrows in europe and we're going to open to the upside here stateside, as well. boeing's second 787 test flight will take to the skies today. it will take off from pain field

in everett, washington. the first test was last tuesday. boeing has orders for 840 of those jets. limited eurostar service resuming in europe today after a stormy left thousands of passengers stranded inside the channel tunnel for up to 16 hours this weekend. service was canceled sfor three days in a row. trains normally carry 40,000 a people a day between britain and continental europe. it will be a busy day for travel across the u.s. let's check in with scott williams, our buddy at the weather channel. >> good morning, carl. busy, indeed. today is the first day of winter. look at all the winter weather advisories, even a blizzard watch for portions of kansas and nebraska out ahead of this next potent storm system that will have major implications across the nation as we continue to go in time. for today, watching for icing concerns as we move into the upper midwest. chicago seeing the snowfall. as we move into your wednesday, a threat for some severe weather traveling around the arklatex,

continuing to find snowfall, blizzard like continues as we move into christmas eve around the midwest and around the great lakes, we're watching that snow continue for your friday. interior sections of the northeast by christmas day, it looks like an icy mix. checking in on a few of airports right now, around chicago, you have the snow. likely to see this green light go into the red category. call ahead. this is just the opening act here. temperatures in the upper 20s and lower 30s throughout the day today. as we look at the extended sfrafrt for chicago, you can see what i'm talking about here as we have a chance for mixed precipitation beginning as we move into wednesday and thursday. so o'hare could be messy here, so call ahead. check with your carrier especially as we move into the middle and latter part of the week. some other areas that we'll be watching, as well, as we go in time around the baltimore area, you have a chance for icing concerns as we move into christmas. and one last stop here. as we move into the forecast for this particular area around boston, we'll be watching for your temperatures to be cold and a chance for some rainfall as we

move into saturday. so this time, it looks hike we'll escape some of that wintry weather as we move into christmas eve and christmas. certainly this storm will impact some of the retailers and some of the problem continuing for some of the travelers. now back to you. >> scott, we can see the global warming right there on that five-day right behind you. i mine, for those that -- >> it's happening before our eyes. >> i mean, look at that, scott. i mean, cannot -- it's going straight up. thank you for that, scott. and thank you, carl, for those squawk stories that you brought us, as well. >> did you know either of those things about the 787 test flight or the -- >> i knew that they were testing that again. i didn't know they were squawk stories because we have coming up this morning's top stories, which i'm not sure how those differ. >> nobody wants to hear them. >> you because they already heard the squawk stories? >> yes. you can read that. >> in addition, we have president obama meeting with the nation' community bankers,

apparently not auto a personal level. he's doing okay, right? he's talking about other things. meantime, the senate rushes towards a health care bill and we emphasize the word "rushes." we'll head to washington for the latest. thing as taking a chance?

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with carl quintanilla. and becky quick. becky quick, ladies and gentlemen, becky quick, becky

quick! >> oh, i'm sorry. i overslept. i'm so sorry. were you out late? >> no. i went to bed at 9:30. >> hey, this is working, though. this is working. >> we should do this every day. >> and come in a half hour later? >> you heard the take away. that was an old sales trick. all right. if you don't want this, that's fine. someone else will. when you're not here, people at home are like -- >> no. i'm so sorry. i'm so sorry. i haven't overslept in five years. >> rin. and it's your last day of week for the year. >> i'm going to vacation early. my brain is already there. >> we could have had a moment of sleeping, too. don't -- yeah. >> i got some really good sleep last night. >> too good. >> i get to pick one song every day. i already picked one, but we may change it. you missed a lot. >> i heard. >> you missed carl's squawk

stories. >> the yield curve is really steep. >> the e is pronounced in chloe, but not in joe. >> he told chloe cho that they should be chloe and joey. >> oh, our chloe. >> i thought it was something interesting. that was the most interesting part of the show so far. on the agenda today, do you know gdp is coming out? >> yes. >> oh, yeah. that's one of a number -- >> revised. >> revised. >> it's a number of noteworthy releases today. that's at 8:30 eastern. and, you know, if you made it for that, which is -- thank you. anyway, a final read on third quarter gdp. forecasters suggest the report will show the economy grew at a rate of 2. %, which is a slight downward revision from 2.8%. the advanced reading, you might really, came in at 3.5. economists suggest less construction activities and

lower inventories to track this a bit from growth. and we're going to put you to work right away. >> unless you want me to -- >> have you done your voice exercises? >> no. >> anyway, coming up at 10:00 eastern time, we get existing home sales. that will be hitting the tape right at that time. economists are predicting retail sales will rise to the highest levels in three years. this would mark the third straight monthly increase. on that note, let's get straight to the markets this morning. kevin ferry is standing by at the cme. >> he's on time. he's able to be here. >> thanks, kevin. >> i made it. >> and it's even earlier out there. >> it is. and kevin, you'll be watching, what numbers today? is it going to be the home sales, gdp number? what's the most important issue? >> i think you have to start with gdp, beck. we're ahead of everyone else. you got a decent number, but it

was still a down number out of the uk for their gdp number. i think you can see that the globe is at least heading in the right direction still. that's what the market is dealing with. i don't know if you heard, but the yield curve is steep, so that's -- >> getting up to speed right now, kevin, franticly. >> you could have been out for three months and still known that. so you didn't miss anything on the way in. but i think the key that is -- the fashion in which it's steepening and that's what's going to be the big factor here in the states going into the first quarter of next year. >> the dollar once again yesterday was driving stocks, right? >> right. so we turned the corner. two weeks ago, we thought that was going to be a good thing. maybe there's some rotation, people are able to get off of that trade. the key being it's the other countries now that are trying to use their currencies to stabilize there. and you can see that last night in japan with the nikkei having a couple of good sessions. so i think going forward, what

you have is if inflation isn't going up, that means real yields are start to go weigh in. and a higher yield here in the states is good structurally and it's good for the dollar. that's what we're seeing the beginning of right now. >> we're going to hear some things out of washington today. we've got some of the small and community bangers coming down. what's the most important issues that you'll be watching there? >> well, i think the key, and you can it over the weekend is it adds to uncertainty. i think overall, this is important going forward, businesses would like to get into the early meetings and start and make a game plan for next year. anything that leads to uncertainty about what the playing field is going to look like, whether it's regulation in the banking sector, pressure for lending, or the health care issues, it keeps those managers from making bold decisions. so i think get the playing field laid out, let people make plans for the year going forward, and

i definitely think you could have a very strong economy, you know, a stable. take some of the volatility out of it, a much better situation. but that is what washington's job is now. make the playingfield something that corporate managers can adjust to and is plan for. >> hey, kevin, you were -- yesterday we were talking to bob iaccino at that time. he said he was the only person on the floor right then. are you the only guy on the floor? >> yeah, pretty much. people must be coming in late, like you. i don't know. there will be people here at least for another session or two. obviously, we get supply tomorrow. so i think that you can't leave too early. it will be thin trading. that's been the order of the day. but it's still important trading and i think you'll have a couple of good sessions. >> yeah. and we did see triple digit moves earlier in the session yesterday. right, right. >> and you could see pretty big swings one direction or the other. thursday's jobs number, will that still have the same impact on christmas eve? >> absolutely.

i think you can easily hit an air pocket, becky, because next, the week after, you have to take down this supply. so the markets are trying to work in some type of concession where the street will be able to and the light environment take down a lot of government paper. >> all right. kevin, thank you very much. it's great seeing you. >> happy holidays. >> merry christmas, happy holidays and i'll see you next year. >> okay. >> you've been waiting all day to say that. >> since like fourth grade. >> the president is going to meet community bankers at the white house today. the group will discuss the economy, lending to small businesses and financial regular legislations. "the washington post" saigs says treasury will offering banks $30 billion to support lending. meantime, the senate's second vote on the health care bill is expected early this morning. democrats passed the first test along party bliens yesterday voting to block that threatened gop filibuster. today, a simple majority is required to approve the amendments and 60 votes to move to consideration of majority leader harry reid's bill.

let's go the washington for the latest on that. john harwood joins us. john, we spoke yesterday about how this thing is going to be resolved in conference. the times lead with some of the challenges that are involved in merging these bills. is this house going to want to make this, at least in part, their own? >> yeah, they're going to want to, but look, there's 60 votes in the senate on the democratic side. they need every single one of them to pass this bill. so the house understands that. they know they want to pass a bill. everybody agrees that the democrats would be worse off if this fails th otherwise. so i think the house is going to make whatever compromises are needed to get it done. they're not going to simply say, okay, senate, we'll take your bill, but when it comes to the hardest bargaining, the senate has the stronger hand. >> so what elements of the house bill, and we know it has the public option. it has the tax over 500,000 for wealthy americans. what is likely to stick? what are they likely to keep? >> well, with i think we're

going to have the area that is most ripe for back and forth is on the pay force. the house may try to accommodate for the fact that they can't get concessions on other issues, like the abortion language, for example, or the public option. by getting more of the pay fors, the financing to their liking, like the tax on high income people. now, the senate doesn't want to go with that approach, although the senate has come up with a way to increase means testing for medicare premiums to pay for their bill. you saw that the senate tax on cosmetic surgery, botox and augmentation of various kinds was deleted because some of the medical profession was opposed to that. >> although not good news for the tanning bed industry, right? >> that's correct. but we'll see whether some of that comes back. but i think the pay fors are a likely area. you may see the house alter or tinker with this nonprofit

national plan that the senate came up with in lieu of the public option. that might be a place where the senate could feel they got something where in other areas they won't. >> has it been lost on the hill that the markets rallied yesterday and at least some were pointing to this near resolution of the bill as a reason for that? >> no. i think people did notice that and some people who have a particular jones for taking on one industry or the other may be upset with that. you know, if insurance company stocks go well, some of the left say, hey, wait a minute. if the insurance company is doing -- if their securities are doing well, why should we be for this bill? i've got to say, that's kind of a dumb reason to be against a bill that the democratic presidents have been trying for 70 years. but do hear some of that. but i think overall, you're -- in the previous segment, you guys were talking about certainty and uncertainty as a negative factor for the business community. i think democrats are going to look to late january when they

expect president obama to be seated at a desk with a bunch of legislators behind him and ten pens and signing this bill and handing them out to people and saying, we won, we've delivered for the american people near universal health care. i think they're looking for that as a landmark moment that will sort of set the tone for 2010. right now, if you look at the midterm elections, democrats are going to take a big hit and they're hoping to kind of turn the corner cyclely and begin starting to tell the american people, here is what we've done for you rather than the excruciating process of getting it done. although one other issue, of course, i was in copenhagen for the climate change talks, they're going to try and move that cap and trade bill in the senate. that's going to be tough. >> i was going to say, now that we may have health care out of the way, it will be interesting to see what leaks forward to the front burner. >> carl, you know what is the interesting thing? what is the easiest of all these initiatives? wall street regulation. they're going to move regulation

in the senate. they're korchbls with the house. of all the things they're trying to do, health care, energy, wall street regulations, that's the easy one. >> interesting. that's something that's right -- that's our bailiwick. john, thauk to you later. john harwood. >> if you have any questions about anything you see here on squawk, e-mail us, squawk@cnbc.com. when we return, forget santa's radar. track squawk's screen this morning. we have the stories lighting up left and right and we will bring you up to speed straight ahead. boss: ah! thank goodness you're back. gecko: what's going on, sir? boss: we're slammed. tons of people interested in all the money they could be saving by switching to geico.. gecko: yeah, 'course. boss: boy, did we miss you last week. that temp wasn't working out at all. exec: took me all morning but i got those quarterly figures for ... you. (hissing noise, gulping) gecko: aw, he ate all my mints. anncr: geico. fifteen minutes could save you fifteen percent or more on car insurance.

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welcome back. on this tuesday morning, we are watching futures higher this morning. across the board, you'll see the dow futures are higher by about

31 points above fair value. this comes after gains on monday's trading session. also this morning, boeing may be ready to buy a charleston, south carolina factory. the seattle times reports an all-hands meeting has been called for early today. it could serve as a platform for the company to announce the purchase. this plant, by the way, is a 50/50 joint venture with an italian company. actor bruce willis is taking a stake in sobieski vodka brand. the stake of 83,000 shares will serve as a payment for willis for a four-year deal to promote sobieski worldwide. we want to go over to alex witt who has some of the headlines outside the world of business over at msnbc. good morning, alex. >> i do, indeed. this one is going to make you -- well, let's get to this story. the senate's health care bill has picked up a key endorsement

from the american medical association. now, assuming democrats can repeat their successful vote on monday, the bill looks on track to secure final pass edge on christmas eve. this is the one i was telling you about, carl. the government is telling airlines to let passengers off of planes if they are grounded for more than three hours. the new order is a response to several infamous recent incidents of airlines keeping passengers stranded indefinitely. the airline industry claims the new limit, which takes effect next year, will only cause more flight cancellations. and moscow's ice swimmers plunge into an arctic lake for the 50th year. it's not good any way you look at it. those daredevils call it refreshing and invigorating. would you do that, joe? i'm thinking no. >> there he is right there. >> thanks. i have a skimpier suit, actually. i wear two thongs, one on each cheek and three, one in front. >> i can't even think about

that. >> no. al eblgs, a lot of times in clubs, if you're in the sauna or steam rooms, it's a cold plunge when you come out, it's close to 32 degrees and i've done that. it is shocking. but when the weather is a lot colder, you think -- >> but you're outside and then you don't get back into the warm. but how do their hands not stick to the ladder he was climbing out on? like if you lick the pole? >> can i just apologize? look what i started on this discussion. and more video. my god. >> his hair is darker in the water. >> i know what you're talking about. >> i'm sorry, there's joe with the pitch fork. >> you know, thank you, alex witt. thank you. thank you, alex witt. just don't lick the pole. it's that simple. i was worried one of my kids might do that just to see what it was like. >> to see what happens. >> because it freezes and it's horrible. >> like on "dumb & dumber."

>> and in "christmas story." >> how uncomfortable is -- >> very uncomfortable. i can't believe we make our guests to that. >> and you're used to the cameras. >> that is uncomfortable, and i feel for our guests. apparently the board room is even sitting up there by yourselfoug. >> would you do one? >> no. >> try it. >> you've got to try it and see what they go through. >> okay. all right. >> a little awkward. coming up, we're going to have the hms that caught our attention this morning. a trip to the chairs is next. first, though, here we go. let's look in on the squawk board room. >> they have each other, at least. >> and see how uncomfortable our guest hosts are. andrew ross sorkin from the "new york times," he thanked up in his book. also former fdic chairman and current bank of america board member don powell, double the dose of guest hosts on "squawk box" this morning.

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this is big! join me, carl quintanilla, for an unprecedented look at the company you think you know. >> big mac, inside the mcdonald's empire tonight only on cnbc. we're back in the chairs, picking up stories that caught our attention. guys, obviously i haven't read all the papers yet but one story that did catch my attention was the lead of "the wall street journal" today, talks about an fbi probe hacking into citibank. the interesting thing is, according to authorities who told -- talked to "the wall street journal," they say that

there were tens of millions of dollars stolen by compute hackers. citi says there was no such infiltration, they didn't lose money, nothing was ever put in jeopardy. that's a little odd. i mean, who's got the story right? >> it's arussian cyber gang -- >> which has broken into security organizations in the past. >> they don't know if they've gone in on their own, through a thirty-party and the bank is denying it to begin with. >> tens of millions of dollars. either the money got stolen or it didn't. it's hard to understand how there could be gray space in between. >> you would hope they knew about -- i mean, from a client account? is it from a citi account? >> they go on later in the story to track a gentleman who lost over $1 million. he doesn't know if it's part of a larger organized issue. citi helped him recover that money, $800,000 and paid him back the rest. >> i can see why citi would want to deny it.

>> it's happening at a time when we have more and more concerns about what's happening in cyberspace and the president is appointing a new cyber czar to making sure -- >> another czar coming? >> security czar. >> he's got a lot of czars, right. >> just like old russia, speaking of russia. we've seen what weather has done to flights, flying on airplanes. you saw some fines d.o.t. is leying against airplanes that keeps you stuck on the tarmac for more than three hours. they have rarely done this, given fines. when they have it's been 50 grand for the whole thing. now it's 27 grand per passenger. >> per passenger? >> a plane of 300 passengers is $27 million. that's negative reinforcement. >> you drive back to the gate? what if the gate's taken in. >> that's the airplane's take, it's going to lead to more canceled flights and inconvenience. 1500 flights last year were stuck on the tar mar mack for more than three hours. >> have you ever been stuck on

an airplane for more than three hours? i've been for 2, 2 1/2, close to 3 hours. >> i've been on the tarmac longer than flights many times. >> how do you usually come down on it? would you rather get off and go back and start over or do you want to wait out? >> at that point, right, three hours? >> i hate boarding, too, that takes a while. >> might as well just cancel your trip. >> you might as well. nobody likes sitting there. in newark it's always -- you finally move away from the gate and they go, you're 28. usually it's 2 minutes, 1 1/2 minutes per plane. you can see them slowly moving along. anyone see diane sawyer last night? >> i did not see the show last night. >> no. >> i hear she did well, though. >> yeah. they microanalyzed -- she had stephanopoulos on right away. we're interested because we're in the media but "nightly news" she finally got it, 64 years

old, which gives me -- >> "world news". >> yeah. she looks like she's about 34, doesn't she? >> yeah, she does. >> that's amazing. i'm going to strive for that. i'm going to strive for -- >> you're already on your way. >> so i can still, like, try to achieve -- >> look 34? >> no, achieve for things -- >> in decades to come. >> i'm not coasting? you i'm used to, the weekends, the "today" show. with me, i'm happy where i am. when i leave here, it's going to be on a gurney. top stories when we come back and our guest host, andrew sorkin and former fdic chair don powell for two hours when we come back. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out,

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the santa claus rally is on. >> ho, ho, ho. >> the tech-heavy nasdaq now at a 15-month high. key upgrades to dow components lifts the markets. on tap today, gdp data and existing home sales. banking on america. former fdic chairman and b of a board member don powell joins us in studio to talk about the fate of the financials in the new year. and he's an international man of mystery. >> ya. >> ya, baby! >> he's taking bond investing to a new level and has the performance numbers to prove it. >> why make trillions when we could make billions? >> the international bond master and his money-making plans for 2010 revealed as "squawk box" begins right now. ♪ i like to dream

♪ yes yes right between the sound machine ♪ good morning, everybody. welcome back to "squawk box" right here on cnbc. i'm becky quick along with carl quintanilla and joe kernen. on our rundown this morning, don powell on a day when president obama is holding a meeting with community bankers. we'll be speaking to him in just a moment. we also have andrew ross sorkin joining us and first niagara bank ceo about community banks, how they're doing as the economy moves toward recovery. we'll get an updated from the nation's retailer as they count down to christmas and make up from time lost to the big snowstorm in the northeast. we'll be revealing our own man of mystery. first, carl with a look at the top headlines. >> do we know who it is? we'll start with oil prices. >> bond guy. >> what's that?

>> the bond guy. >> james bond? >> no -- oh, that's it. sorry. carl, you were on a roll. i'm really sorry. opec agreeing to keep output unchanged, $40 barrel to just over $73. among today's economic reports the final reading on third quarter gdp looking for a 2.7% gdp. existing home sales will hit the tape, economists predicting retail sales will rice for the highest in three years. we've seen starts and permits tick up in november. health care reform bill set to clear another step in the senate. today lawmakers will vote on some amendments to the bill, final passage of the bill could come on thursday and could, tend into the evening, if republicans take all the time available to them to slow that down. >> a late night christmas eve debate. let's check on markets. we've been watching the futures

and they've been above fair value. if you're taking a look you'll see dow futures are almost 30 points above fair value. this comes after a day of gains for the markets so keep an eye on that. also f you're washing the ten-year, the ten-year note at this point is yielding 3.715%, so that yield creeping higher. today we'll get gdp numbers. the dollar is what was moving the stock market yesterday. we did see some triple-digit gains at some point. today the dollar is higher against the yen and euro, down against the pound. you're talking 1.4286 euro/dollar. gold prices, at least, are just slightly lower, down by $3 to $1,093 an ounce. >> the dollar's been rallying. some people say it's because rates are eventually going up and things are getting better here but some people say it's worries about europe, right and a lot of the debt in europe. we saw it with moody's, cutting greece. the debt in greece from a-2 to

a-1, that was one notch and that was less than people thought greece deserved. >> but this is the third time. >> yeah. and warning that there could be more, warning more. downgrades citing soaring deficits. moody's is the third rating agency to downgrade greece this month. one-notch downgrade was less than people thought so maybe it will be taken positively. if moody's follows -- i'm taking my time with this because, you know, this never gets old, becky. you weren't here -- >> looking at the video. >> when you talk about greece, it's easy to order video for greece. that is greece. there's more greece. it just -- we can go on and on and on and on, because, really, just pillars. coming into next year banks would no longer be able to exchange greek government debt for cash in ecb refinancing -- greece -- operations.

that's greece. what is that? sorkin, you're -- >> i don't know. >> what is that? >> send me to greece, joe, so i can -- >> we talked about greece from the day after the dubai -- >> and gold and gold. >> because they had gold. >> that's true. >> we've talked about that a few times. >> i don't think he's right, but i didn't have the balls to tell him -- >> you don't think they have any gold? >> i do, but i don't think it's going to impact their ability to pay back their debt. >> i remember your reaction, it was like, okay, that's all right. >> and gold has fallen. >> that's true. contract electronics maker jvment j. bill circuit swinging to a first quarter, after reporting earnings ahead of expectations and raised their outlook. >> we've got nothing for jabil circuit to show you. >> you mean in the way of video?

>> yeah, fog. greece we're set forever, right? >> hopefully at some point -- >> there's some more. that's greece. it definitely is greece. >> i mean, you look at that and you can see the downgrade. >> you're going to do -- >> moody's is all over that. that is moody's right there. >> what are you -- are you going to do the cyber russian deal the gang or the citigroup -- >> let's see what we've got. let's see what they roll. >> or fbi? >> the fbi is reportedly investigating a hacker attack on citi that led to the theft of tens of millions of dollars. the journal says the hackers were connected to a russian -- guys, this has nothing to do with greece. a russian, not a greek cyber gang, a russian. no, no, no, no, take that away. two other -- >> i like it. >> two other computer -- >> it's like a screen saver. >> included one connected to the u.s. government agency were also attacked. citi tells the paper it had no breach of the system and that there were no losses by the bank or by its customers. take a guess.

overall, all online crime, how much did -- how much money was lost? >> $1 trillion? >> in the u.s. >> in the u.s.? less. >> $260 million. which doesn't sound like a lot, given the kinds of figures we throw around now, wouldn't you say? >> i bet it's more. i mean, if you start thinking just about the integrity of the system, if they're hacking into the electronic -- the electric grid and some of the areas. i mean, it's -- >> yeah. that's reported. >> what is -- shoplifting is a lot more than that each year. what do they call that, leakage? >> yeah, 1%. >> or shrinkage. >> shrinkage. >> they're both horrible. >> i'll look it up on the national retail federation. >> they're both dooish both things retailers -- >> i think historically it's 1%. >> anyway, we're hearing from two "squawk" guest hosts this morning. the first, former chief regulator don powell, which chaired the fdic, now board member at bank of america. yes, are you.

and he's going to get grilled by our second guest host, best selling author and "new york times" business reporter andrew ross sorkin. author of the book, the definitive book on the collapse. >> thank you. >> called "too big to fail." gentlemen, and you probably want to talk to don about moynihan, don't you? >> i do. we were talking on the way out, on the perp walk, as they call it. i didn't know that's what you -- >> that's what it's described as. >> don, when we had you on, we asked you, did you know how -- how on message you were? you have to be as a board member, don't you? is there a school for that -- >> on message? joe, i'm just me, you know that. i just flow. i just flow. >> you didn't give me anything when we asked you how many people did you look at -- >> i gave you everything, joe. >> you looked outside but you couldn't pay him -- >> i told you it was a robust process, search. >> and you settled on the best candidate. >> that's right. we always want the best

candidate. >> and you wouldn't answer whether compensation caps hindered your ability to get someone from the outside. >> he said it would not be appropriate. >> that's right. thank you, carl. it was not going to be appropriate. >> you're good at this kind of stuff, too. >> we got the best guy. >> what do you think, andrew? what do you want to know about the -- about kelly, he went to notre dame instead, kelly. >> my only question is the following, he may be the best guy given the context but he was available several months ago and it took several months to get to him and there seemed to be an effort to go outside and to go to others. some have suggested he's young, 50 years old, would have been better to find somebody a little older? >> how old are you, andrew? >> i'm a young guy, but i'm not up for the job. >> let me just tell you, the integrity of the process was very, very important. you had to look at the landscape. had you to make sure that we were able to find an attractive -- the very best candidate. he was out there. we've got some great, great

leaders at bank of america. some of these people that head up these lines of business, from merrill lynch to retail to wealth management to commercial lending, these are good guys. we have a great team. so we wanted to make sure we had the right person. >> but, don, we did ask a couple of analysts, and they said as much as they respect brian, he's a great leader, he'd only spent a couple years in some of the most important lines at citi. their question was, should you have had a more seasoned veteran coming in? >> that's always an issue we talk about, but he has touched all business lines at bank of america. he has experience, he had respect, he had -- not only, he had trust among the fellow employees at bank of america. up, this is a guy, as i mentioned, he's a force for change and he has continuity. he's got institution -- >> some people say he is an outsider because he's complete. >> well, he's been at bank of america for some time so he

understands the business model. he embraces the business model. >> don, can you at least tell us what we've been hearing anecdotally that compensation caps can work against the best efforts of board members to do what's right for the bank -- or the company they're overseeing? >> compensation is always an issue, but it's just one component. >> but if it's capped, does it make it harder? did it hurt your search and your ability to -- >> you must remember that bank of america paid off t.a.r.p., therefore, it was not under the special -- >> during the search you were still under -- during some of the search. >> the search is not completed until we paid off t.a.r.p. so we wanted to track the very best candidate and conversation was a factor. we were sensitive to the environment. we were able to pay what we wanted to pay. >> let me ask you a different question. would have you paid back t.a.r.p. as quickly as you did because at the time you took an internal candidate?

at the time there was the view you were getting closer with bob kelly and might have to stretch on the comp numbers? >> again, that was -- compensation is always a factor, but our objective was to find the best person. >> you know, don, goldman paid back the t.a.r.p. before you guys. they still went to five-year stock. i mean, perception -- you know, but doing what -- doing what the law says is one thing, but, you know, it would have been impossible for you to announce a -- >> but -- >> you couldn't have announced a $30 or $40 million package for kelly. >> we're very sensitive to the environment in the marketplace. bank of america has been a leader, joe. bank of america has been a leader in compensation packages. they've always paid for performance. there's -- most of the pay is deferred, it's deferred, based upon performance. and it has lots of components that relate to risk. >> did anybody at bank of america reach out to the compensation czar to get his opinion on a pay package? because that was reported the day after --

>> we're a regulated industry. we talk to lots of people. we talk to institutional investors, we talked to private investors, we talked to regulators, we talked to the payment czar. we talked to a lot of folks. we're very visible. we wanted to get opinions and views from lots of people. >> we saw last week that john mack from morgan stanley decided to forego any bonus. what signal do you think that will send to other firms, including bank of america, in terms of the type of comp packages we'll see this year and more importantly, what about next year? >> i think everybody is sensitive to compensation. i can assure you, brian is not waking up every morning, what's my compensation? he's about leading bank of america and to increase the shareholder value. and to encourage and to motivate the people who work there. >> we'll talk more about

compensation in view of what happened in england and france. when you see that, what does that make you think? that something -- >> i think it's a reflection of the environment. i think it's a reflection of the -- >> it's astounding. windfall property tax on anything over -- >> we saw that in the energy business some time ago. i think the conditions that these banks find themselves in where taxpayers have assisted, i think everybody is sensitive to that. compensation is something we should all be concerned about. >> if i ever get a board, will you be on my board if i need a board? >> i'd love to be on your board but we can talk about your compensation now if you'd like. >> maybe we shouldn't. i don't know -- but is he not a -- >> why? >> because he's a very good board member. very stable and makes sense and never says anything -- never tells us anything. >> but you asked me about who should set compensation. i've been waiting for that

question, joe. >> oh, taert. should it be the shareholders, the board or ken feinberg? >> give me one. >> a, b, c. >> the board should be responsible. we're regulated industry. as you know, the federal reserve is coming out with compensation guidelines, s.e.c. is coming out with compensation guidelines. we're very sensitive to the environment, but, again, the bank is owned by the shareholders. we are elected by the shareholders. it's our responsibility to set policy, one of which is compensation. we're a fid you shear representing the shareholders. >> what is downside to letting shareholders decide? >> shareholders indirectly do decide -- i think it's important that directors, the policymakers, they're more close to the situation, they understand what's going on in the situation, they're there on a monthly or bi-monthly basis, they interact with management

but sensitive to the shareholders and what's going on. directors need to -- they're engaged. >> at least you hope so. >> well, i can tell you that the bank of america directors are engaged. >> yeah, yeah. >> one last question, how important is the ceo? we were talking about this article in "the wall street journal" that got sort of the importance or lack of importance in some respects of the ceo on the overall performance of a firm. you've been one. >> yeah, i have been a ceo. you know, i was not important, but i can tell you, what's important, for instance, like bank of america, the ceo sets the tone, has vision, strategic issues, but the day-to-day running of that business is teller, from mexico to relationship manager in charlotte to someone in san francisco that is dealing with that customer. and bank of america has a lot of people who are doing the right thing for the customer. >> we'll hear more from don and andrew over the rest of the show. andrew won't just be an

interviewer -- >> you'll grill me? okay. >> now, i want to talk to you, andrew. i want to ask you a bunch of questions later. >> you can do that. >> no mercy. >> yeah, no mercy. i want to talk about his age, i want to talk about his experience -- >> compensation. >> we can talk about ul these things. >> i want to talk about responsibility. >> as a journalist. >> as a journalist. who is he accountable to? andrew, who are you accountable to? >> guys, i found shrinkage, $37.4 billion, that's what it was in 2005. >> wow. >> you're right, it's a much bigger problem -- >> internal theft at retailer. >> what is leakage at a retailer? >> that i don't know. >> i'll look it up. coming up next, we'll have much more about spanning the globe. spanning the globe for returns, we mean. our international man of mystery makes big bucks in bonds. he runs one of the year's best performing bond funds. we'll get the secret right after this.

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now the answer to today's aflac trivia question. on this day in 1956, the first gorilla was born in captivity, entering the world in what american zoo? the answer -- the columbus zoo in ohio. >> as you craft your portfolio for 2010 remember it's not just stocks that can boost returns, oppenheimer bond fund has been on a tear this year. joining us oppenheimer's fund manager joins us. art, good to see you again. >> good morning. >> bond yields and the spread now front page story in "the journal." has the bond environment changed for good? >> well, it's certainly changing, as we speak. you know, i've been fortunate to proceed side over a 20-year career where we've seen interest rates in the u.s. go from, you

know, 30-year treasury bonds at 14% when i started down to, you know, 3% and change today, and short rate at zero. it's a reasonable bet those rates aren't going to get much lower any time soon, irrespective of whether the economy grows quickly or slowly from here. so it does force you to be a lot more selective in what you do. you know, the thing -- the counterside to that is, of course, you know, we think that stocks probably aren't going to be such a bad performing investment over the next ten years and should outperform bonds. i'm a bond guy and i'm going to actually say i think stocks are going to be the better place to be for the next book. >> you need some lessons from your own book. >> unfortunately, if you look what's going on, investors, mutual fund investors, have poured something like $60 million into short-term, high-quality bond funds this year. arguably they're chasing last year's results. and have drawn about $60 billion out of typical equity funds.

again, i think bonds have a very important place in people's portfolios and that will continue to go forward. we see lots of opportunities in the fixed income space. it's about what's the right portfolio balance? investors have a bad experience because they sell at the top or they buy at top and sell at the bottom. we're just encouraging people to look at their portfolios with a clean sheet of paper and say, what's the right mix for stocks and bonds. >> interesting. would you expect the curve to steepen even more? if so, by how much? >> certainly, it can. you know, not a whole lot more from here, but, you know, we're going to set new records for steepness as long as the fed is very clear that they have no intention of raising rates any time soon. you know, we've seen articles in the press here and there suggesting, well, because the economy is pretty strong that rate hikes might come sooner rather than later. our baseline forecast is for hikes in the third or fourth quarter of next year. possibly even in 2011. the fed will probably remove

some of that very cautionary language like extended for a long period of time stuff. maybe as early as the second quarter or earlier in the year. that's what i think it's going to be katie bar the door in terms of how these asset prices move. you had a prefigure rags of that with the jobs numbers and you saw the dollar soar and interest rates sell off. we are to be prepared for that. as international bond guys, we have a lot of foreign currency exposure. in the simplest iteration, we start to lose money when the dollar starts to go up. but there's -- fortunately for us, it's a little more subtle than that. like the dollar may go up broadly, we can have opinions about currencies will do relative to other ones. every currency has a num rater and denominator. and i think that's the way forward. when you look at countries like the euro, which are now credit challenged with greece and whatnot and the bailout that's

going to have to be engineered for a lot of these european countries and look at the balance sheets and a lot of emerging market countries, they're better. bank capital adequate ratios are better, gdp ratios are higher, domestic demand is growing at a faster pace. these guys continue to do well. it's the trick -- the trick is to have the underweight or short side be correct. >> hope you'll accept our apologies for keeping us short but good insight. coming up, we go from big boxes to specialty shops. we'll get an update on how holiday shopping seasonle is shaping up so far. more foul weather across the country. will it put a damp other sales? tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out,

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welcome back to "squawk box" on cnbc. let's talk about other corporate news you need to hear about. take 2 interactive are set to take a hit. it's selling its games distribution business and slashing its 2010 forecast as a result. the company is trying to focus on its core business and cut costs. analysts say it may look to sell off other pieces of the company, things like sports games unit as well. also, apple's new subscription

tv venture may be getting big name partners. "the wall street journal" says cbs will offer internet-based tv subscriptions. apple want to start next year but no licenses deals have been signed as of yet. when we come back, retailers scrambling for business with three days left until christmas and later the president meeting with community bankers today in a follow-up to last week's meeting with the ceos of the biggest banks. we'll talk to the ceo of first niagara bank. boss:hey, glad i caught you. i was on my way to present ideas

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welcome back to "squawk box." let's take a look at the markets. the futures have been in positive territory all morning long. in fact, right now those dow futures are more than 40 points above fair value. we've got gdp coming up a little later this morning. also, the second test flight of boeing's dreamliner will take place today. the 787 jet finally took to the skies for the first time last

week after two years of delays. boeing has orders for 840 of the dreamliners. toyota is reportedly seeking to cut costs for its auto parts by 30% over the next three years. published reports in japan say toyota is asking suppliers for price cuts for parts that will be used in cars that are sold in the year 2013 and later. and yahoo! workers will be on a forced vacation next week. yahoo! is shutting down offices between christmas and new year's and a cost-saving move. it is the company's first ever mandatory shut down. they tell cnbc that employees were told about this planned shutdown over the summer. we have a busy week for travel across the united states. in another storm making its way east. scott williams at the weather channel has details. hello again, scott. >> good morning there, joe. certainly we will be watching this next potent storm system impacting not only travel but a lot of retailers here as we approach the christmas holiday. now, as far as the winter

weather watches and advisories already posted for much of the west, already into the midwest, we're watching this next storm system as it continues to be on the move here. we'll see problems around salt lake city, also around the phoenix area, watching for showers and thunderstorms. eventually, as we move into your christmas eve, a bit of a holiday humbug, if you will, because of all the dynamics coming to produce a mess here. the northern plains, the snowstorm as we move into the western great lakes, icing is possible. the southern extent of this particular storm will produce thunderstorm activity. this mess continues to move into the northeast as we move into christmas day here. but this time it looks like it will be more of an ice event for interior sections of the northeast. but as far as your conditions for your tuesday, this is what we'll find across the area. the snow, especially moving west of the continental divide. meanwhile, the upper midwest will find snow showers as well. expect airport delays as we move into salt lake city, als also as

we move into chicago area as well. we already have reports of some delays as we move around chicago at about 25 minutes. we'll continue to watch this next big storm system. now back to you. >> thanks for that. we're paying a lot of attention to weather this week. in fact, we're also getting down to the wire for holiday shopping. only 72 hours left until christmas morning. dana telsey, research officer for telsey group and john klein research analyst at piper jaffray. good to see both of you. jeff, talking about the storm, is it big enough to take a dent out of sales at a measurable pace? >> you know, we think it did dent sales through the third week of fiscal december. our estimate is it took 1 to 3 percentage point off mall-based retailers. not insurmountable. most management teams expect to get back what they missed. inventory levels are so low so the downside or clearance

activity it very low to profits. >> we're not looking at a penny per share impact, in your view? >> no. it depends on the retailer. on balance we think the profit picture looks very, very encouraging for retailers. the bottom line is how the street reacts to slight upside. there's so much business left in the month we think consumers will be out in force in the next few days and make a majority of that missed business. >> dana, how many cities have you hit since the beginning of the month? >> eye hit 12 cities, in addition to the cities on the shopping tours. we've seen a lot of traffic, better than we've expected, conversion is happening, prices are lower than last year. >> is the theme for the season, then, dana, going to be traffic better than expected, margins better or worse than expected, or average transaction? i mean, what's -- what are we going to be talking about after

january 1st? >> we'll be talking about this is a profitable christmas season. as jeff said, inventory levels are lean. i think we'll see earnings come in better than expected, but overall, top line sales should only be flat to up half a percent when all is said and done. >> jeff, do you go along with that? >> absolutely. it's really got to be about profit this fourth quarter. i think most people see that. the overall sales growth will be modest. i would say up a percentage point would be our estimate. it's going to be different by sector. the important point is profit starts to recover, cash flows improve and now a separation of retailers as we go into 2010. there's still ways to make money in retailers and we think there will be growth winners in the next quarter. >> what do you make of the mix? there's been all this anecdotal evidence, apparel and footwear not doing well but made up for by strength in electronics, is that true? >> with we think is early in the season, electronics and toys and video games are very strong.

apparel is not a must have item in terms of being a specific item. it is a must have category later in the season so tend to be a late build for the category. we think the interest is just starting to build after three years of being distracted by electronics and cell phones and mp3 players, they're coming back to it. we'll have a good season and even better we think 2010 in apparel. >> you're saying that sales are flat to up, to some extent and margins are greater, profits are greater. what's driving that profits? is it cost? >> well, the profit growth is being driven by cost. it's mark down savings, number one. just having control of the inventory makes a huge difference, several hundred basis points of markdown savings for retailers from target through mall-based retailers. sourcing, pricing stability and overall expense cuts across organizations. >> yeah. >> dana, so it sounds like the quarter has been tracking like you expected. given that, is the run-up of the

stocks we've seen lately, is that already built in? i mean, what's left to surprise investors on the upside is move stocks further? >> i think that's what's going to get stocks moving further is top line. i think as we look towards 2010 the focus will be on discretionary versus need base and getting the stocks going is going to be growth plans for 2010. no company really is laid out their square footage growth plans, anything with marketing, anything to be a top line driver, given that we're going to see some incentive compensation come back into expense structures and sg&a in 2010 may be up a little bit, so you'll need top-line growth. >> so 2010 is going to be more a year of the tiffany's and coaches, you think, than the walmart and costco? >> yes, we think fine jewelry is having a good season this year and will be a standout. tiffany will be a name for holiday 2009. >> we'll see what will happen over the next three days. appreciate your time, dana and jeff.

thank you. when we return, the ceo of first ra bank talks to "squawk" first about moving from a thrift to a commercial bank. coming up next on "squawk box."

welcome back. check on equity futures. looking pretty good. markets around the world looking past things like another debt downgrade for greece. meanwhile, the dollar, up five straight versus the euro, highest since early september. look at that, joe, below 1'43. gold, lowest since november 1st, down 7% for the month. >> 1100. >> yeah, below 1100 at 10 # 1. president obama is meeting with community bank chiefs at the white house as lending troubles continue to plague the sector. boom and bust hit some small financials hard but our next guests had a much smoother ride to recovery. joining us is john koelmel, ceo

of first niagara bank. thanks for joining me. >> thanks for having me. merry christmas. >> i know your bank was one of the first to take t.a.r.p. and one of the first to pay back that t.a.r.p. money, back in may you paid back $184 million that you took? >> correct. we were invited in, as you said, end of october by the ots. we were able to raise about $380 million in early april and use a little less than half of that to repay it. as you said, just prior to memorial day. >> and where do you things stand for your bank right now? people look around and think the small sector is in better standing but it's the majority of the banks that have been shut down have been small banks as well? >> times have been a real ally for us. i talk about performance and position and potential. our performance has been very, very steady and consistent. we've delivered good quarter earnings growth for our shareholders. we've managed the capital credit

liquidity cards, we think, pretty effectively, so we're in a real strong position with the acquisitions we've done, along with core growth, we have significant earnings potential. so investors have responded very well to that. most importantly, we think we're doing a great job serving our customers. >> john, the big banks have gotten tired of getting named the big bad financials when small banks weren't doing anything, they've pushed back to politico. they say of the 130 failures of fdic-insured banks that have taken place in 2009, 107 banks had assets of less than $1 billion and they point out 63.5% of banks that took t.a.r.p. money had assets of less than $1 billion, too. what's the fair way to characterize who got in trouble, who did things wrong? was it big banks? small banks? a little bit of everybody? >> i'd vote for the latter. i think you can spread it around.

clearly, too big to succeed is some of the challenge that some of the biggest have, but at the same time, a sustainable business model's a challenge for the industry. sxing t and i think the little guys just don't have enough depth and breadth in terms of their business model to make it work over the longer run. this is a tough go right now. economically, environmentally, the politics, regulation that keep tightening those screws, so it's -- it's tough to make it work. and if you don't have the capacity for a sustainable run, whether you're large or small, you'll be up against it. >> john, let me ask you a couple thing. talk about your loan demand and underwriting policies, if, in fact, they have changed and speak to how are we going to measure capital in the future? >> well, take the first one, don. our loan demand continues to be very strong. we compete against many of the larger players, whether across our legacy franchise in upstate new york. i was down in pittsburgh

yesterday, western pa, some bigger players as well. we're stepping in, filling a void as they pull back or sit on the sidelines for a while. so weave had double digit loan growth in our business portfolio in particular for a number of years. and it's as strong if not stronger than ever right now. but you're right in connecting the capital issue. that's what needs to settle down and sort itself out over time. government can continue to push for more loan growth and more loan process, but we've got to find a new norm in terms of that regulatory capital requirement because to the extent they keep dialling that up, as you well understand, fewer dollars can be leveraged for the benefit of our customers. that needs to settle down over time. it has had the predictable overreaction, the pendulum swung too far, and we need to find a new norm that will work for the industry as a whole. >> are you looking for more acquisitions? are you participating in the failed banks? are you bidding on failed

institutions? >> we think there's ample opportunity for an organization like ours to continue to grow via the acquisition path. we focus first and foremost on organic growth and marker growth day in and day out. the acquisition world is very fertile right now. i think will continue to be so. so we think there's a great opportunity to be bigger as well as better in the years ahead. that could well include some of the assisted transactions. though, frankly, we said to invegers, we're not chasing those. obviously, the economics can be attractive. but in terms of strategic fit, we like the direction we're moving and think we'll have ample opportunities to build out our franchise over the next few years. >> what is your view of the consumer financial protection agency that don add and frank h been pushing? a number of community banks have come out against it. >> i accept it as a reality. we're going to have to operate in a world where there's inkra

mental operation, getting accepted and understand, real and perceived the consumer at times has been disadvantaged. just need to be careful that the politicians don't overprescribe some solutions to that. they need to trust the system, the free market system and the industry as a whole to get that right. we've got a good consciousness in the industry and i'm sure we'll sort that out over time. don't need a whole lot of extra nudge from the politicians in washington. >> john, thank you very much for joining us. >> happy holidays. >> john koelmel, president and ceo of agra bank. coming up, we preview today's third quarter gdp coming out at 8:30 a.m. eastern time. a lot more to come. up next on "squawk box," don't make a trade until you know which stocks are making headlines. joe tells you all the pretrade news you need to know in "stocks to watch."

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♪ oh i feel it coming back again ♪ ♪ like a roll of thunder chasing the wind ♪ ♪ forces pulling from the center of the earth again ♪ ♪ i can feel it >> leat's take a look at stocks. yesterday it was alocoa back to 16, that was a $5 stock and that was after it was upgraded.

morgan stanley had something to do with yesterday's gain. intel, after barclay's said positive things. those were the two positive stories yesterday. let's look at analyst calls today. one involving ford, target increase, the price set $12 from $9. wow, back to $9.723. that is -- that is staggering. let's see the low on ford. $1.50 for the year. the firm is raising 2010 earnings per share to reflect a more bullish outlook for europe, ford europe. ubs updates normalized earnings outlook to include some gains achieved in '09. manpower upgraded to buy from neutral. bank of america/merrill lynch, did they talk to you about this? >> they missed me. >> being on the board. but the target was increased to 65 from 63. ameritrade upgraded to outperform from market performance. and aol initiated with an equal

weight at barclay's capital. and a price target of $30. $30 on aol. that stock closed around $23. it's weird to be hitting up aol again. and that -- >> from -- >> yeah, as it's own ticker? >> i think back, i think we had someone go out and talk to jerry levine, who said -- >> he said he doesn't regret the deal. did you see this? he said he would do it again. >> like aromatherapy -- >> he said he didn't regret it at all? >> that's what i remember seeing. >> he had some other -- >> even steve case is now. accepted -- he doesn't fully accept it but -- >> you know what's amazing there? i didn't understand the internet back then and time warner and why it would make sense to merge internet company with a media company, but the idea was right. i mean, if it would have been google or somebody else, the idea for media and digital was there, but the dial-up -- >> it was five years ahead of

itself. >> dial-up, $180 billion and the biggest destruction of value in the history of man almost. >> not to say he doesn't -- but not to say he regrets -- doesn't regret it. >> aol is worth $2.4 billion. >> how much is he worth now? >> who's that? >> jerry levine? >> probably not as much as case, right? i'm guessing. i'm just guessing. would you say? >> probably not. i don't know. i like what case spent his money on. >> there's been others, joe. there's been others. >> nothing like that, though. >> well, you know, the energy business, it's pretty dramatic. >> we should point out this news alert that the senate has approved final changes to the health care bill. they just need aid simple majority today. this is part of the process to get to the 60 votes to move to consideration of the bill itself. that's one more procedural hurdle that health care is making on this crazy, crazy health care week. >> christmas eve. >> yeah. >> and then the house, which front page of the new york

times -- >> does that mean health insurance stocks will go up today? that seems to be the correlation. >> yeah. i think some of them, yeah. >> i don't know if that's an inindictment of the bill or not. >> that's not going to be -- >> talking about that -- >> it's hard to tie individual stock moves with things happening, isn't it? what if they were selling off on the public plan and then they came back a couple percentage. 6% on a $10 stock, that's 60%, right? >> all right. >> that was the most preposterous thing i've seen. we'll get to final read on third quarter gdp, half an hour away. the pulse of the people, the senate, rushing to get that bill passed before kris pass. what about average americans think of the push? some dueling perspectives from both sides of the aisle. weet gel pollsters to weigh in. as we go to break, wow, look at that. more scenes from greece. thank you matt greco, our ace producer. fithe same tools the pros use,

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the economy in a holiday mood. >> santa's coming to town.

>> oh, my god! >> the markets get more data on the nation's recovery, but is the grinch ready to steal the good cheer? ♪ you're a mean one mr. grinch >> the final third quarter gdp report arrives at 8:30 a.m. eastern time. so, you're -- >> america's health care crisis. the health care bill may have cleared a major hurdle, but are americans truly on board for this massive overhaul? >> all aboard! and is santa making his move to wall street? >> so you're really santa claus? >> you never can tell, kid. >> the spirit of markets past, present and future will tell us if the big man has finally arrived.

>> do you know this song? >> weezer. >> oh, weezer? welcome back to "squawk" on cnbc, first in business worldwide. i'm joe kernen along with becky quick and carl quintanilla. don powell and new york times business reporter andrew ross sorkin joining us for a couple of hours. andrew, as you know, also the author of "too big to fail" if you have not read, you must order today. >> i appreciate the plug. >> i've heard people say they were sad when it ended. i'm not joking. >> thank you for saying that. coming up at 8:30, we'll get a final read on third quarter gdp. practicalers say the number will say it grew 2.7, a slight downward revision from previous 2.8%. markets looking good.

downgrade of greek debt. let's get to becky with top stories. about 90 minutes after that gdp report we'll get existing home sales hitting the tape. economists are predicting resells will rise to the highest level in nearly three years. forecasters say sales rose 3.3% last month to a nan rate of 6.3 million, marking the third straight monthly increase. also, opec ministers are meeting in angola today. they say the cartel has agreed to keep oil unchanged at current levels. boeing's 787 test flight will take to the skooid skies today, taking off from everett, washington, as long as flight conditions cooperate. that first test was last tu tuesday. it was witnessed by 20,000 people. boeing has orders for 840 of those jets so far. time is running out for retailer as we head towards christmas. so will the weather cooperate? what about getting to grandma's house for christmas as well? the weather channel's scott

williams has more on all that. good morning again, scott. >> good morning, becky. certainly we are keeping tabs on the next potent storm system that will have implications from coast to coast. right now moving into the interior sections of the west, but salt lake city, next in line to see the snowfall. boise into billings, phoenix will see showers and storms. also expect rainfall as we move into los angeles. so where is this storm system headed as we move into your tuesday? well, it will continue to move a little farther to the east. we are watching for an icy scenario as we move into parts of nebraska, around iowa. wednesday we go, it moves into the south plains. a chance for severe weather and it will continue to push towards the east. bring rainfall as well as move into your christmas eve, around the mississippi river valley. around the great lakes, watching for that ice. this time as it moves into the friday time frame here at christmas, it looks like the major cities will be warm just for rain this time, but interior sections will watch for ice. what about traveling today? chicago, you have the snow right now, delays minimal at 25

minutes. snow showers throughout the day. so likely to see that green light go into the red category as the day continues to press on. as far as some other areas that we're watching, the world's busiest airport, no weather delays expected but watch out for volume also as we continue to go in time. now, new york's laguardia, quiet conditions, no weather delays, but volume likely here. you'll see a lot of sunshine and temperatures topping out in the low 30s. as we move into boston area, also not expecting any weather delays. temperatures today will be chilly. this is where we'll find problems if you are traveling along the i-90 corridor, watching out for snow around chicago and through portions of nebraska, it could be a wintry mix with freezing rain, even sleet. sioux falls, expect colder temperatures and certainly problems on the roadway here. give yourself some extra time. also this weather could impact some retailers as folks make that last dash out to buy some of those gifts. now back to you, carl. >> thank you very much, scott.

scott williams of the weather channel joining us with a look at what the weather will be like. it has not been a good weekend. >> no. is it finally winter now? >> yes, it is. as of yesterday. and the days get longer. from here on out, you're looking at more light. like two minutes longer. >> 24 hours and two minutes? >> no, the daylight hours. >> you said the days get longer. you do that all the time. >> days get longer, nights get shorter. >> oh, but it's always 24 hours? in less than 30 minute -- >> grinch. >> becky understands that this morning. >> in less than 30 minutes, we'll get -- in fact, in less than 25 minutes we'll get the third quarter real gdp number. to explain david greenlaw, chief economist at morgan stanley and

moodi moo moodys.com, pea pete zandi and e liesman. would you agree that if the economy were a stock it would have been guiding estimates higher for the past month or so? david? haven't we suddenly started ratcheting things up for the near term and next year? >> yeah, absolutely, joe. on the fourth quarter gdp number, today we'll get the revision of the third quarter, old news, small downward adjustment expected. for q4, over the course of the last month, we've moved our tracking estimate up by a percentage point from 3% to a little above 4%. so no question things are going in the right direction at this point. >> but, of course, people think that's going to be the best number and not nearly as good in 2010? where are you in 2010? >> over the four quarters of 2010, something like 3.25% growth. >> that's above, too? you've gone up there as well in the last month? >> we haven't changed the

estimates for 2010 in quite a while. >> but you're ready if you need to? >> yeah, i do think we see decent momentum coming out of q4. i think it is going to be a sustained recovery, but it's going to be subpar relative to what we've had historically. >> mark, same type of questions to you. where are we for the fourth quarter? is that going to be the best quarter of the next five? >> i think it's tracking around 4%. a lot is the inventory. inventory situation is improving more dwik quickly than anticipated. half the growth in q4 will be inventory. that's why in 2010 we're not going to get as much juice. i'm a bit less optimistic. i think growth will be 2.5% for the calendar year 2010. >> that was my bryant gumbel mark, why? i see you didn't realize it. >> sorry about that. i missed it. >> why? >> well, i alluded to one thing,

less inventory change so that provides less juice in 2010. more fundamentally we're getting a lot of juice from fiscal and monetary stimulus that isn't going to be quite as potent as we make our way in 2010. there's still some weights on the economy. the credit situation, credit isn't flowy freezely, foreclosure of chrysler, more home foreclosures to come. businesses reigh reduced layoffs but little evidence they're hiring. we have to stay on faith they will start to hire. >> instead of a senior economic reporter i'm going to call you our senior economist, steve. when will we get a positive jobs number? is it soon? >> you know, let's back up and talk about -- >> you don't want to answer that? >> i do, i do. >> you've got your own agenda -- >> i'm going to get there. give me about 30 seconds. >> you are like a guest now. you don't answer the questions. all right, go ahead. >> joe, i think the real question is -- >> the real question you want to ask -- is that a bill gross

imitation, carl? >> and my bryant gumbel was an imitation of carl doing bryant gumbel. >> i think rates can -- >> how many layers into imitations are we here? the thing that's interesting about the fourth quarter is that business is really the one that drives this higher number than was expected, less than expected inventory and better equipment spending. and my answer to your question ticking it positive higher, in terms of businesses coming to the fours, we did that story about how much extra cash is on the books of the banks, the percentage of cash relative to net -- you know, joe, when you buy a stock these days, on average you get $1 of cash for every $10 of market cap that's out there. there's an incredible amount of cash out there. and i think it's possible -- i know david thinks it's going to be a lackluster recovery, as does everybody. but when businesses get spending, they start spending. i think there's upside potential for the economy, if you can get that cycle going. that's going to lead, i think,

to positive hiring. what eames seems like in the first quarter of next year. >> david, he just referenced you. >> joe, you asked for the month. you want the month, right? >> yes. >> this month? >> no, i don't think so. i think february will be the month we get actual job growth. and then kick in in march, april and may because the census has to hire several hundred thousands during that period. >> that doesn't count, does it? >> it's a 1.5 million people. >> no, it counts. i mean, that's real income to real people so that could really turn things around at a critical point for the jobs market. it will fade away in the summer but hopefully by then the private sector -- >> mark, do you think you might be too low or conservative, on or do you definitely think we have a lot of things holding us back? >> i sympathize with what steve said. there is a lot of cash. a lot depend on confidence. there are still a lot of weights. i think businesses were put through the proverbial wringer.

i don't think businesses forget that very quickly. i don't think that's in early 2010. that's probably not until 2011 event. >> joe, to answer the question, why don't you ask powell when his bank is going to start lending to businesses and then we'll find out when we'll have positive hiring. >> all right. we just had a guy from first viagra -- first niagara, i'm sorry, first niagara. we all said offcamera, we almost said it wrong. we got e-mails about it. becky, you almost said it, which would have been -- >> the guy wrote in in the middle of the conversation. >> back to extending credit. >> any final thoughts, david? >> just mark is absolutely right on the sizeable contribution from inventories in q4, but it's because of a slower pace of decline in inventories. we're not building inventories across the economy. indeed, we don't expect inventories to build until 2011. i hear some concern we're building inventories and demand won't be will to absorb those inventories. we're not getting inventories.

we're getting a positive contribution from a slower rate of decline. we have a long ways to go before we build inventories but production is moving in that direction. >> thank you, gentlemen, david, mark zandi and steve liesman. if donald trump were watching that interview, what do you think he would have said? >> it's dynamite. it's really dynamite. it's terrible. i don't know why you're impressed with that. >> he does say that. it's the best interview we've seen of economists. it was dynamite. >> thanks. the u.s. health care bill getting 60 votes to pass this second procedural test. so the wheels continue to churn. >> yeah. we just did something else about that, right? >> yeah. >> so they're doing things right now -- >> voting continues, yeah. still leading -- >> towards the midnight christmas eve, right? >> 7:00 p.m., i think. when we get back we'll get the final number on third quarter gdp, likely get numbers and instant reaction at 8:30

eastern time. is america really on board with the health care reform plan? we'll get some -- a view of what some pollsters say.

welcome back. futures looking pretty good. we've got real gdp -- or final gdp for third quarter coming up in a few minutes. markets around the world doing very well after that big day yesterday. you saw alocoa. >> that was on the upgrade. >> and general feeling about how -- >> almost 16. and then intel. >> the upgrade, that's right. >> we are well above where we were when the ftc pulled its best euro imitation shakedown. you know, got a big deficit. a billion here, billion there, shake down some of our companies. making headlines this morning, cbs and disney considering participating in apple's idea to have paid internet tv subscription. viacom, turner and discovery don't seem inclined to join. apple recordly want to introduce the service next year. arena pharmaceutical submitting an application to the

for a new diet drug. that senate health care bill headed to a vote on christmas eve, getting the 60 votes needed to pass this second procedural test a few minutes ago. the latest poll from clear clear politics finds 38.7% of americans are in favor of that plan. joining us this morning, bill is a partner and co-founder of public opinion strategies, dean is ceo of public policy polling. bill, let me start with you. we've seen some polls that suggest support has jumped like six points since the beginning of the month. is this thing tracking backward now, where now that it's closer to being done, people are happier? >> i think dean will agree, most survey has shown a drop from november to december. and the deeper we've gotten into this senate debate, the more this bill's been hurt. and nbc/wall street journal polling, which i do, this has dropped to 34%. this is a good idea, 47% think it's a bad idea. that's the lowest number since

april. that's the general direction of most polling. that can change, but that's where i think we were heading into this vote. >> dean, the white house tries to argue, look, you get a big piece of legislation through like nafta with clinton and naturally you're going to ride some sort of tide going into midterms. is that possible? >> that's true. it depends on what part of the country you're in and how this is going to impact you. if you're from the west, they're mostly in favor of this but if you're from the south, only 2% of peop -- 28% are in favor. it will be more challenging for congressmen in the south this upcoming election. >> how would characterize how the president's polling numbers have held up. i've seen some that say it's the worst first year slide for any president in history. >> he's had a gradual decline but he leveled off in may and has been steady since may hovering around 50% approval mark. >> 50% is a big number. we've looked at off-year elections since 1962 forward.

and if a president drops below 50% on job approval, the average congressional loss is almost 40 seat. so as we head into next year, the fact that president obama in his first year is below 50% is very significant. and, by the way, after health care, what is also means in terms of other major changes, i think, it means a loosened and very difficult chance -- a loosened grip and a much more difficult job for the president trying to corral democrats toag >> guys, what's the typical profile of a person that is for health care reform and a person that is against health care reform? >> the person for it is a democrat, about 69% are for. person against would be a republican, white male, where you have about 90% of the population again it. >> age? >> go ahead, dean. >> the older you are, the more opposed you are to it. >> dean's points are consistent with our tracking. look, in 2010 election what we know is the percentage of people

over 65 goes up as the percentage of the electorate. opposition is highest for seniors and with independents. also because, frankly, the republican scope of our losses over the last two election cycles, they've got almost 50 seats held by a democrat where john mccain won. those are disproportionate in the south and west. this right now is a very unpopular bill. and intensity, the people who are very opposed are almost 40% of the country, very supportive is only about 28%, 29%. that intensity gap is a huge part of what drives off-year elections. as a pollster, you have to say polls can change, the white house will pass this bill and attitudes may improve. that may or may not be true. i think they'll have a very difficult time changing the trajectory of this bill between now and 2010. >> andrew sorkin here.

do you guys test to see how informed the respondents to the polls are about these issues? one of the things i always wonder is when you see a group come out against something, or even for it, i wonder how educated they are about the issue itself. >> well, we've been doing tests across the country where when we do our national polls we're asking questions which basically you should be able to answer if you graduated the eighth grade. the more opposed you are, the more likely you are to miss the answer to that test. >> yeah. and, you know, i think the thing that happens -- we do an open-ended question telling us what you've seen, read or heard about health care and we can track what people are talking about when they talk about the health care legislation. and, you know, and i get these questions saying, well-being look, they're not really opposed to this bill, they're opposed to what they think is in the bill. it doesnatter. as a political consequence, what matters is what people perceive to be health care reform. today what they perceive, too

much government, it's going to cost too much and their quality care will get lower. the reason this bill is in such difficult shape in terms of public opinion, who's for a piece of legislation like that? if the white house passes it, they think they'll be in the clear. i think they'll find that to be difficult in the short-term. >> dean, is that dynamic typical of big legislation? big picture legislation, whether it's medicare -- we probably don't have poll numbers going back to the invent of social security. about it's that complex and that difficult to explain or understand, is the default for people to say, i don't like it? >> well, i don't think that's initially so. it has to do with who got out there first with their message and republicans got out there strong that this was a bad bill. it isn't really so much about perceptions as it is just about emotions. right now the republican base is very emotional. right wing is very emotional.

they're very energized. that's the thing democrats have to be worried about the most. 69% of democrats support it but 90% of republicans definitely oppose it. so they're very strong in their opposition, very united. while democrats have majority of their own party in favor of it, they're not as enthusiastic about things as republicans are angry about them. >> you mentioned the -- quickly on the congress side. you mentioned the likelihood of 40 seats switching parties. is that possible this midterm? >> it's hard because there's not enough democratic open seats. all i'm saying is that's the historic average. we don't know where obama will be. the other trouble for democrats is in the nbc/wall street journal pole, people for the first time said it was a bad idea was core voters, moderates, older women. the trouble for the democrats is those groups wanted a morrow bust bill. they wanted a public option. so the reason that there's an intensity grap is the core

democrats did not get the bill they wanted. >> less than 90% -- >> it's a two-front war, to keep the independents and the left. >> right. but still 90% on the right. they don't care how toothless it's become because -- >> we have gdp coming. >> appreciate it. >> thank you, guys. >> thank you. coming up, government dropping off a few presents. thc principles of td ameritrade. it means you help investors... you don't just sell them. it means no hidden agenda. td ameritrade always has...always will... put the investor-- you--first. that's how they work. that's how they deliver objective investing help. that's what td ameritrade stands for. what does your investment firm stand for? it's time for fresh thinking. it's time for td ameritrade.

the final report on third quarter gdp is right after this. you don't want to miss it.

finlt gdp final gdp for third quarter about to be released. steve liesman, andrew ross sorkin and don powell. they say this number will be likely academic, let's get it anyway. >> final gdp, what's the number here? it looks like 2.2%. i'm doing a double take on that. that's quite a bit below what's expected. we've been expecting lower inventories and lower construction numbers. it looks like consumer spending coming in -- inflation in line. final sales, 2.3 verse 2.7. that was revised downward. consumer spending down just a tick. business investment down minus 5.9 from minus 4.1. let's see, what else? structures down more than had been originally reported. equipment and software spending. pretty much the revision downward across a whole bunch of different areas here. government spending revised downward 2.6ers have 3.1. i'm looking for the inventory

number. may need another table on that, guys. a much softer number. this number was reported at 3.5%, down to 2.8% on the second read and now 2.2%. i'm not seeing any additional inflation. price index is 2.6 versus 2.7. core 1.2 versus 1.3. it's going to come off the top line, noninflation adjusted number. inflation under control in this report here with pretty healthy consumer spending but everything else around it -- i have to think one of the takeaways from this will be some of what we thought was in the third quarter might get shifted into the fourth quarter. >> and sh has big fourth quarter numbers. >> yes. >> let's get reaction. scott nations, andrew sorkin and don powell. will this give anyone pause in he can qu equities?

>> maybe. to the degree they've made money, they want to take it and go home. what we've seen this rally up to -- it looks like it's going to be 1120 on the open of the s&p is largely organic, m&a and generally good news. and that's also the fact that we've -- since the 50-day moving average and the s&p turned upwards in april, we've only been below that level twice. it was tentative both times. that's 1090 on the s&p. it's all puppies and kittens right now. that's a little scary. i was watch being 15 minutes ago and everybody's happy. there's still lots of problems, when job losses starts, does that mean inflation begins? are there going to be serious sovereign debt issues? and there are other problems. we're ignoring those right eye right n right now because the s&p is up. there are still problems out there. >> but we have people bringing the problems to us every day, scott.

and, you know, we're staring the markets right in the face. don, did you -- >> i want going to ask about the bond market. you talked about he cequities. what about the bond market? >> the bond market is about the yield curve. a few years ago we would be talking about the conundrum. i don't know how the fed is going to -- is going to undo that problem. you know, they're probably looking at some banks and saying, hey, this is great for the banks but it's obviously a problem, it's pointing towards -- it's more good news because it says that people think things are going to get much better, but it's always a little worrisome when people are really happy or when things get to the extremes of their ranges. that is certainly the case with -- certainly the case with the two-year versus the ten-year right now and the whole yield curve is very steep. you wonder how the fed will unwind that without jacking up rates across the entire curve. >> dave, you've been looking at these things.

do you still -- that's still your contention we may move some stuff into the fourth quarter? >> the big question has to be what david greenlaw from morgan stanley talked about in the last half hour, which is the inventory number. we liquidated inventories at $139 billion annual rate in the third quarter. the original take on that was minus $133 billion. and the question is whether or not we can continue to liquidate inventories or will continue at this rate. at some point maybe it even goes positive. so i think that the expectation among economists is going to be that the inventory liquidation has to slow down. if it's a less negative number the way gdp works, it adds up contributing to gdp. export number, since we've had a couple decent trade numbers, it was pretty much flat from the last revision. i think that might improve over the next quarter. >> those are the two things you're pointing to that cause this number to look a little weird? >> inventory number for sure. and also, i mean, just -- joe, just generally across the board

here, downward revision and things like, state and local, minus 0.6 to 0.1, government revised down 0.5 percentage point. that's not the contribution to gdp, just the total. everything was revised downward. i think the level here is the one worth debating, 2.2% is below trend growth, at least what we think is trend. say it's 2.5%, 2.75%. the not a rate that would absorb any unemployed or underemployed out there. it would not lead to positive job growth. i'm sure if mark zandi were here, that's what he would say. you're looking for 2.5%, 2.75%, 3% number. >> possibly none of these numbers are out of the range of a statistical deviation, bouncing along as we move forward and recover from things, right, steve? it doesn't throw a wrench in the works for the whole thesis, right? >> it doesn't. i'm sort of optimistic about

next year. if we don't eclipse that 2.5%, 3% rate, it's going to be really tough for people in the job market. >> right. thanks, steve. scott nations, thank you. >> thank you. >> sorkin's still here and don is still here for the next -- >> you need to check on that, right? >> well, you didn't want to talk. you didn't want to say anything. >> you guys are pretty smart on your own. >> oh, really? thank you. >> yeah. >> unlike all the people who take the poll about health care. >> oh! >> okay. stick around, we have more guests today. in fact, our next guest has been thriving during this real estate downturn. steven rosenberg, the ceo of graystone and company. thanks for joining us this morning. >> good morning. >> it's very good to see you. graystone is one of the largest commercial fha lenders in the country. how do things stand in that market right now? >> actually, it's -- debt market is doing extremely well right now. our volume this year is about double, almost triple the

volumes of the best previous year. we are looking to hire staff because there aren't that many lenders in the multi-family commercial lendingfield fie? >> why is that? >> banks are not lending. the bank regulators have told banks they want to -- they want them to reduce their exposure to commercial real estate loans. and are pressuring them to sell those loans or get them off the balance sheet. as a matter of fact, we are getting really almost inundated with calls from banks, large and small, to purchase their multi-family commercial loan portfolios. fortunately, we're in a position where we are able to purchase because, besides being an fha lender, we are also one of the leading fannie mae lenders. that fannie mae platform allows

us to buy portfolios of loans from banks, refinance those and convert those into fannie mae mortgage-backed securities, which are quite easily sellable into the capital markets these days. >> but fannie mae and the fha, that's basically the only game in town, we've heard from other people, too? >> that's exactly right. they are pretty much the only game in town. we are seeing spotty activity from some local banks, but, again, the type of lending local banks are doing are full recourse, lower loan to value. so your proceeds are not as high. and a shorter term. what you can do with fha is the loans are nonrecourse. they're 30-year -- 35-year amortization and extremely low rates. so i think the best game in town right now is fha or fannie mae. and, you know, it really just proves the point of how

important government activity is in the lending field. you know, i was thinking that, you know, housing seems to be quite sacrosanct in this country. and the fannie mae and freddie mac and h.u.d. were all built and created to help the housing market. how wonderful would it be if there were government agencies or some type of government sponsorship of commercial lending? right now in the multi-family field, you know, you can get a loan. >> but, stephen, there are other people wonder, the government stepped in. it's been the only game in town. have you seen any signs of life outside that? it doesn't sound like it, from what you've been talking about. is there a point where the government won't have to be shouldering the lion's share of what's going on in that field? >> there will absolutely be that point. you know, especially in the multi-family or housing market, you know, it begins with the government 37. and then what happens is, the

market gets more comfortable with the underlying collateral and slowly, but surely, the government weans itself away from the market for whatever reason. >> but you don't see any signs of that right now, correct? >> we are not seeing it right now. i can tell you that a few years ago, as fannie mae and fha lenders, we not compete with the market. so markets ebb and flow, inve investor appetites ebb and flow. there's no question that the markets will come back. i don't know how fast. but it's almost like the government-sponsored programs are the yeast in the dough that, you know, forms the catalyst to make things happen. >> stephen, are you concerned about the fha default rate and about the debts to balance? >> there's no question that default rates are going up. am i concerned about it? of course. until jobs start growing and people start getting

re-employed, you know, there will be problems. but, again, like everything, you know, it turns around and the sooner people start getting hired and companies start growing again, obviously, the defaults will slow down. so, of course, you have to be worried about it. you can't just put your head in the sand. but the bottom line is, there is lending activity but right now, really focused on the government agencies, fannie, freddie and fha. >> we want to thank you for your time today. >> thank you very much. nice to be here. checking the futures out of that final gdp number for the third quarter, i think we are just about even again. we came in at 2.2%, below what we thought. that's, again, the third quarter. we're almost done with the fourth. and some who were taking the bright side of that saying that it does support the notion that q4 remains on track to show expansion of 4%. when we come back, we'll get top stories and holiday edition of "the traitor's edge" when

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♪ you know, they say the markets don't do a lot the last couple weeks of the year, but we are awfully close to 52-week highs on the s&p. we're back positive for the month to date. futures will give us more this morning, even though we saw another downgrade of some sovereign debt in greece.

and this gdp number for q3 came in a little less than expected. >> santa claus is powerful, and so are his rallies. i would like to tell about you breaking news. warren buffet's berkshire lathe away will be a member to board of directors. steven burke, chief operating officer of comcast cable operators will be joining berkshire hathaway's board of directors. this is a very well-known board, well-known company. here's a comment from warren buffett, he says steve is keenly interested in berkshire. those are the key ingredients. having him join us is a home run for berkshire. again, this is a new member being added to the board of dringters at berkshire hathaway. this is a new member being added. no one is leaving. charlie mumger, ron oe slsen, v

well known board. >> some say disney was arranged by buffett and -- >> dan burke was one of the father. >> abc put them together with disney at that time. he's known this gentleman's father for a long time, probably known this guy for a long time. do we have warren buffett calling in on the phone? i don't think we do but if we did, he might say -- >> it's a great addition. i've admired steve for a long time. it's a fantastic day for berkshire hathaway. full screen makes it sound like he's on. let's not do that. >> that was carl. >> he didn't call in, so we don't want to waste you. but that is -- >> sorry, warren. you know we love you. it's all in fun. >> we've done it for him at the correspondent's dinner. >> he loves it every time. >> he does. that's probably what he was saying.

>> andrew, you know the score pretty well, too. >> it's an interesting choice, but you're absolutely right -- >> he goes way back. >> you're right because of the relationship. it's a board of relationships. you think of tom murphy and the connections. it makes some sense. he, by the way, is your new boss. >> that's the thing. >> in some respects. >> and you wonder how -- >> you haven't broken out in comcastic song just yet. >> change is always score. if this something preoccupy him a little more than normal and he doesn't micromanage the actual assets here at nbcu -- >> it's a board of relationships, then when are the independents? >> that's an interesting question about berkshire hathaway. that is one of the very few companies thats s that has boa directors, but ostensibly is the word i would use. >> but it's one of those firms that's done extraordinarily well

so -- >> performance, you don't focus on other issues. >> we should mention, too, we mentioned in passing but comcast has obviously cut a deal with general electric to buy 51% of nbc universal, which is parent company of cnbc. that deal is still pending before regulators. probably another 12 months or so of wrangling before regulators before a deal actually goes through. steve burke is comcast chief operating officer. he's being added to berkshire hathaway. >> he's not taking another board seat. >> no. this is an addition -- >> an addition to the board. which that's unusual. i don't know that berkshire's ever done that before, added a seat. but this is something we'll obviously keep an eye on and watch very closely. >> yep. meantime, when we come back after a break, spirits of markets past, present and future. art cashin on this holiday trading week and all the data

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welcome back, everybody. some more on a story we just told you about. berkshire hathaway, warren

buffett's company, is adding a new member to its board of directors. steve burke, who is the president of comcast and chief operator of comcast, he will be joining the board of berkshire directors. here's a comment from warren buffett. he said, steve at 51 ask business savvy, business oriented and keen interest in berkshire. having him join us is a home run for berkshire. we have been talking about what this meanings both with don powell and andrew sorkin, our guest host today. you asked a question about it? >> i asked a question and share with the audience what you said at break. >> i think there's a couple of issues on this. steve burke, a they thoughtful and smart guy. when you talk about an independent director. there's independence by the book, meaning is there a financial relationship? in this case, obviously not. then there's the largest question of independence. are you my best friend? do i know you? do i know your father?

things like that. that's something that's harder to judge on paper because it's harder to know that relationship. but, of course, actually really makes the difference when it comes to that quote independence you're talking about. >> the big question probably comes with performance and when a company performs well, you're not going to have the same sort of talk. >> it's all relative. >> when berkshire's performed. that's why the questions about independence, frankly, don't get asked. >> again, that's the story. time for "the trader's edge." art cash is at ubs financial services. good morning to you. >> good morning. >> you call it a tether between the dollar and the stock market and the question is whether that is just being stretched or whether it's broken altogether. what's your view on that? >> really too early to tell. it certainly seemed like it's been stretching. it's happened over a couple of days here. yesterday when the dollar basket, the dxy went up in the afternoon, it drove oil and gold into negative territory.

but stocks only gavl e up a portion of their gain. a week or two ago, they would have gone negative on that. they are trying to stretch their way out of this. the question is, can they really do it? we're right at the top end of the range. nasdaq managed to make a higher high. the key here is can the s&p get up to the resistance at 1120, 1125 and see where it goes. >> if that does happen, what's next? you see the bulls have the football. >> they sure do. i would love to see a little better volume, however. if you get up through 1120, 1125, by -- by napkin work, that would mean you probably have another leg up on this rally and we'll see. i have been skeptical on the rally since july so i guess i get coal in my stocking. but givingen the weather outside, that's not a bad gift. >> can use a little coal. >> i was wondering when the bulls got the ball back. they fumble, the bears fumble? >> i think sanchez threw an interception. >> maybe that was it.

>> yeah, i think they're moving along. by the way, the berkshire hathaway thing may be helpful to any on-air talent close to warren buffett. >> we would like to think so. >> hey, the true ten spread, almost 300 basis points and now people are talking about mortgage rates and whether or not that's going to throw some cold water on housing. yes or no? >> yeah, i think that's a problem and it's something i'm going to be watching. if yields on bonds go up, rest of the market can be impacted regardless of what the fed wants to do. the fed would like to keep rates lower, mortgages lower. but if they're going to stop buying them, and the ten year goes higher, we have a different game going on. >> good to see you. talk to you soon. >> thank you and merry christmas. >> will we not see you before the holiday? >> you'll see me. >> thank you, art. merry christmas to you, too. sent me some candy once, remember? >> i did.

>> you did bring them back from omaha with you. >> bought them in the airport. next, our guest hosts get a final shot at sounding off on "squawk box" before the new year. first, check out gold prices this morning. we're coming right back.